Asia shares buoyed by Trump's China comments; BOJ hikes
The BOJ raised interest rates to their highest since the 2008 global financial crisis, with attention now shifting to any clues from BOJ Governor Kazuo Ueda in his briefing on the pace and timing of further increases
Global shares rose on Friday buoyed by the prospect of lower US interest rates and a US-China trade deal following comments from President Donald Trump, while the yen was choppy after the Bank of Japan delivered a widely expected rate hike.
The BOJ raised interest rates to their highest since the 2008 global financial crisis, with attention now shifting to any clues from BOJ Governor Kazuo Ueda in his briefing on the pace and timing of further increases.
The yen strengthened to 155.45 per dollar in volatile trading, near the one-month high of 154.78 it touched earlier this week, while the Nikkei rose 0.3%.
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"The hike may have been expected but, in what feels like the first time in a very long time, there were no major downgrades to their economic outlook," said Matt Simpson, a senior market analyst at City Index.
"This keeps the door open to another 25 basis point hike by the year end, and rates to sit at a whopping 0.75%."
Ueda is scheduled to hold a press conference at 3:30 pm (0630 GMT) to explain the policy decision.
Kristina Clifton, economist at the Commonwealth Bank of Australia, said there is a good chance the BOJ will take a dovish tone after the rate hike as there is still a high risk of economic and market disruptions from US policy.
Investors though remain fixated on Trump and his polices. Trump told business leaders at the World Economic Forum in Davos, Switzerland, on Thursday that he wants to lower global oil prices, interest rates and taxes, and warned of tariffs on exports to the United States.
In an interview with Fox news, Trump said his recent conversation with President Xi Jinping was friendly, adding he thought he could reach a trade deal with China.
"But we have one very big power over China, and that's tariffs, and they don't want them, and I'd rather not have to use it, but it's a tremendous power over China."
Those comments sent China's CSI300 blue chip index 0.6% and Hong Kong's Hang Seng index 1.7% higher. The Australian and New Zealand dollars, as well as the yuan, rose on signs of a softer stance on tariffs from Trump.
That left the MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab 0.6% higher.
Trump's comments on wanting lower interest rates moved US markets, with the S&P 500 (.SPX), opens new tab hitting a record high and the dollar on the defensive as investors remain cautious about the president's next moves on trade and tariffs.
"No politician advocates for higher rates and he (Trump) has always put himself out there as a low rates guy," said Prashant Newnaha, a senior Asia-Pacific rates strategist at TD Securities. "Expect the president to become more vocal and critical of the Fed."
With no new details on Trump's tariff plans, the uncertainty has weighed on bond prices. Treasury yields have been on the rise as bond investors brace for eventual tariffs that may stoke inflation.
The US 10-year Treasury yield was at 4.621% in Asia hours, below last week's 14-month high of 4.809%.
The European Central Bank and the Federal Reserve due to meet next week as policymakers digest early moves of the Trump administration.
Currency markets in general have been tentative after a volatile few sessions since Trump's return to the White House, driven by his pronouncements on tariffs.
Trump has said he plans to impose duties on imports from Mexico and Canada from Feb. 1 and that he will apply tariffs on imports from the European Union.
The US dollar index , which measures the currency against six others, languished near a two-week low of 108.13 and was poised for a more than 1% drop for the week, its weakest performance in two months.
Oil prices remained well below $80 a barrel, under pressure after Trump said he will be asking Saudi Arabia and OPEC to bring down oil prices.
Brent crude futures fell 0.56% to $77.85 a barrel. US West Texas Intermediate crude (WTI) was down 0.51% at $74.24.
