Yen surges as Japanese Abe leaves, actions mixed after Fed change

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LONDON (Reuters) – The Japanese yen surged and stocks fell on Friday after Prime Minister Shinzo Abe resigned over health concerns, while wider stock markets were mixed as investors worried about lack of detail in the change in US Federal Reserve policy.

FILE PHOTO: A pedestrian in front of the London Stock Exchange offices in the City of London, Great Britain, December 29, 2017. REUTERS / Toby Melville / File Photo

The Nikkei 225 stock index closed 1.4% lower while the yen climbed more than 1% after Abe announced his resignation, saying he would remain prime minister until a new one officer be appointed. [nT9N2F501S]

There has been speculation about Abe’s health all week, but the resignation of the oldest Japanese prime minister has rocked investors as he has spearheaded efforts to revive growth through his “Abenomics” reflation policies. [nL4N2FU0RW]

The yen, seen as a safe haven currency to buy in times of uncertainty, jumped 1.2% to 105.33 yen to the dollar, putting it on track for its biggest one-day jump since March, when the coronavirus pandemic rocked global markets.

Some analysts have said the rally in the yen seems excessive given that, despite the uncertainty, Abe’s successor is unlikely to change economic policy significantly as the country remains in the middle of a battle to avoid deflation. and stimulate growth.

“Of course, we don’t know what kind of policy his successor will pursue. But realistically: there is unlikely to be a major change – especially in the direction of a much more restrictive policy, ”said Thu Lan Nguyen, currency analyst at Commerzbank.

Chart: Japanese markets react to Abe’s resignation here

It was a mixed day for stock markets elsewhere as investors continued to digest the Fed’s much-anticipated change in its policy framework, which was unveiled on Thursday and saw the central bank put more emphasis on stimulating the market. economic growth and less on inflation concerns. high.

The policy targets inflation of 2% on average, so too slow a pace would be followed by an effort to push inflation “moderately above 2% for a while”. [nL1N2FT0PR]

Stocks rose first, with investors betting that interest rates would stay low for longer and more stimulus was likely.

But stock markets have since been volatile, with some traders disappointed that the Fed hasn’t revealed more details on how the new framework works or provided clues as to what it will do at its next policy meeting.

“It’s not so much about what to do to fight inflation, but rather to get inflation to exceed target. The challenge is to get inflation back on target and we haven’t talked much about that, ”said Colin Asher, senior economist at Mizuho.

The Euro STOXX 50 fell for the last time 0.21%, while the German DAX slipped 0.3%. The British FTSE 100 was flat.

U.S. equity futures have surged higher and are back to near record highs after earlier volatile trading amid concerns over the impact of a hurricane that hit the center of the U.S. oil industry . Futures on the S&P 500 e-mini were the latest up 0.24%, a seventh consecutive day of gains.

Asian stocks outside of Japan edged up, with the largest MSCI index of Asia-Pacific stocks outside of Japan gaining 0.22%.

DOLLAR DECLINE PROFOND

In currency markets, the dollar extended a previous decline and fell 0.8% against a basket of other currencies at 11:15 a.m. GMT, pushing it back to its lows of last week – which saw the dollar at its lowest since early May 2018.

The greenback has fallen sharply since June as many analysts predict more pain if US rates are to stay low longer and amid political uncertainty ahead of the US presidential election in November.

The euro seized on the weak dollar to gallop again 0.7% higher and was last at $ 1.1905, close to a more than two-year high it recently hit.

The yield on 10-year US Treasuries hit 0.789%, the highest level since June 10, which led to a steepening of the yield curve, reflecting the Fed’s tolerance for higher inflation. It was last at 0.752%, up 1 basis point on the session.

FILE PHOTO: A man wearing a face mask, following an outbreak of coronavirus disease (COVID-19), walks past a listing board outside a brokerage house in Tokyo, Japan March 10, 2020. REUTERS / Stoyan Nenov

Crude oil prices collapsed as a huge storm hit the heart of the US oil industry in Louisiana and Texas without causing widespread damage to refineries.

Brent rose 0.09% to $ 45.13 a barrel. US West Texas Intermediate (WTI) crude edged up 0.23% to $ 43.14 per barrel. [nL4N2FU0GF]

The spot price of gold rebounded 1.49% to $ 1,957 an ounce. The precious metal tends to perform well when the dollar is weak and the Fed sends an accommodating message about the future path of interest rates. [nL4N2FU0KX]

Additional reporting by Sujata Rao in London; Editing by Kirsten Donovan and Mark Potter

Our standards:Thomson Reuters Trust Principles.

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