Asian stock markets saw limited movement on Wednesday, as ongoing economic concerns and shifting geopolitical tensions kept risk appetite low. Meanwhile, gold remained near its record highs, reflecting investor caution. The yen steadied after the Bank of Japan (BOJ) decided to keep interest rates unchanged, as expected.
Yen Remains Stable After BOJ Holds Rates
The yen was last seen at 149.33 per dollar, showing little change for the day. It had a brief, volatile reaction following the BOJ’s decision, as policymakers continue to evaluate how economic risks, such as higher U.S. tariffs, might impact Japan’s fragile recovery.
So far this year, the yen has strengthened by 5% against the dollar, hitting a five-month high of 146.545 per dollar last week. This has been partly due to rising expectations that the BOJ may raise rates.
After raising rates in January, the BOJ’s board voted unanimously to maintain its short-term policy rate at 0.5% during a two-day meeting that concluded Wednesday.
Market Outlook: When Will the BOJ Raise Rates Again?
Fred Neumann, Chief Asia Economist at HSBC, stated that the question is not whether the BOJ will raise rates, but when. “The next move could come as early as June, depending on wage increases,” he said. However, the uncertain global trade situation, particularly regarding U.S. President Trump’s tariff policies, could delay the rate hike until later in 2025.
Investors will now look for clues from BOJ Governor Kazuo Ueda’s press conference at 0630 GMT, hoping for insights into when the next rate hike might occur. Charu Chanana, Chief Investment Strategist at Saxo, warned that without clearer signals from Ueda, expectations for a rate hike in May could diminish, leading to a weaker yen in the near term.
In Japan, the Nikkei rose by 0.69%, remaining near pre-decision levels.
Euro Strengthens Amid German Economic Boost
The euro remained close to a five-month high after Germany’s parliament approved significant spending increases, bolstering conservative leader Friedrich Merz’s position.
Geopolitical Tensions Heighten Investor Uncertainty
Geopolitical tensions have intensified, particularly in the Middle East and Eastern Europe. Israeli airstrikes in Gaza killed over 400 people on Tuesday, ending nearly two months of relative calm since the ceasefire began. These developments have unsettled global investors.
Additionally, Russian President Vladimir Putin agreed to temporarily stop attacks on Ukrainian energy facilities but stopped short of endorsing a full ceasefire. “While ceasefire talks are ongoing, there’s little indication of a lasting agreement,” said Chris Weston, Head of Research at Pepperstone.
These global tensions have left investor sentiment fragile, and market movements were muted. The MSCI Asia-Pacific Index, excluding Japan, dropped by 0.11%.
Indonesian Market Volatile Amid Fiscal Concerns
Indonesia’s stock market saw choppy trading, flipping between gains and losses. The market had experienced its steepest decline in nearly three years on Tuesday, due to concerns over the government’s fiscal strategy.
U.S. Stocks Face Caution Ahead of Fed Decision
On Tuesday, U.S. stocks dropped sharply as investors awaited the Federal Reserve’s upcoming policy decision. Market participants are also evaluating the potential impact of President Trump’s tariff policies on the economy.
Fed’s Monetary Policy Decision on the Horizon
The BOJ’s decision came just hours before the U.S. Federal Reserve’s monetary policy meeting. The Fed is expected to keep interest rates steady, with a focus on new economic projections and remarks from Fed Chair Jerome Powell.
The dollar index, which measures the U.S. currency against six other major currencies, was steady at 103.34, hovering near its five-month low reached in the previous session.
Julien Lafargue, Chief Market Strategist at Barclays Private Bank, noted, “The Fed, like the market, desperately needs clarity on trade, tariffs, and overall policies. We expect Powell to continue advocating for a data-dependent approach.”
Traders are now pricing in 58 basis points of rate cuts from the Fed this year, with the first rate cut expected in July, according to data from LSEG.
Commodities: Oil and Gold Prices Slightly Lower
In the commodities markets, Brent crude oil prices fell by 0.24% to $70.39 per barrel, while U.S. West Texas Intermediate crude dropped by 0.2% to $66.75 in early trading.
Gold prices eased slightly to $3,029 per ounce, remaining just below the record high reached on Tuesday, as geopolitical uncertainties continue to drive safe-haven demand.
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