The yen fell as Ueda gave few clues on when the central bank might raise rates again, saying uncertainty surrounding the U.S. economy and market volatility could weigh on its monetary policy.
The dollar steadied after losses suffered earlier in the week after the Fed cut rates by 50 basis points and assured investors it was a move to safeguard the strength of the economy, not an emergency response to recent weakness in the labor market.
MSCI’s world stock index was little changed after a 1.6% rise on Thursday took it to a record high. It was on track for a weekly gain of 1.5%.
European stocks fell 0.8% from two-week highs, with carmakers leading the decline after Mercedes-Benz cut its full-year profit margin target for the second time in less than two months due to weakness in China.
Wall Street fell on profit-taking after a record session, but is on track to post a positive week. The S&P 500 fell 0.2%, and the Nasdaq Composite dropped 0.2%.
In China, the central bank kept benchmark interest rates on hold, against expectations of a cut. Chinese indices rose 0.2%, but remained close to the seven-month low hit earlier in the week.
The yuan on mainland markets strengthened to its highest level in nearly 16 months following the surprise move by the People’s Bank of China, prompting state banks to intervene to prevent it from appreciating too quickly.
The pound was trading at $1.3300, hitting its highest level since March 2022.
Data on Friday showed British retail sales rose by a stronger-than-expected 1% in August and July growth was revised up. The Bank of England kept interest rates steady on Thursday.
Gold hit a record high of $2,614 an ounce and oil prices were on track for a second straight week of gains. Brent futures were down 0.5% at $74.49 a barrel, but are still up 4.6% this week.
China keeps interest rates stable
China unexpectedly kept benchmark interest rates unchanged at its monthly setting on Friday, against market expectations that were primed for a move after the Federal Reserve made an over-the-top rate cut earlier this week.
However, market watchers widely believe that fresh stimulus will be deployed to shore up the ailing economy as the Federal Reserve’s easing gives Beijing room to ease monetary policy without unduly hurting the yuan.
The one-year loan prime rate (LPR) remained at 3.35%, while the five-year LPR remained at 3.85%.
In a Reuters poll of 39 market participants this week, 27, or 69 percent, of all respondents expected both rates to be cut.
“The rate cut is likely to be included in a broader policy package, which is being reviewed by senior officials,” said Xing Zhaopeng, senior China strategist at ANZ, referring to Chinese officials in charge of monetary policy.
“Current economic data and expectations support a rate cut. In addition, the lowering of existing mortgage rates also requires further reductions in the 5-year LPR, which may result in a one-time, significant decline in the LPR in the fourth quarter.”
A raft of economic data for August, including activity and lending indicators, surprised on the downside and increased the urgency for more stimulus measures to shore up the world’s second-largest economy, market watchers said.
Analysts and policymakers expect Chinese monetary policymakers to step up measures to at least help the economy meet its increasingly elusive 2024 growth target.
The weakening Chinese economic activity has led international brokerages to lower their growth forecasts for 2024 below the government’s official target of around 5%.
President Xi Jinping last week urged authorities to strive to meet the country’s annual economic and social development goals, state media reported, amid expectations that more measures are needed to shore up a flagging economic recovery.
“There is a high probability that the People’s Bank of China (PBOC) will cut rates and banks will soon lower long-term interest rates,” Commerzbank analysts said in a note.
“Weak growth calls for easing monetary policy, and Fed rate cuts give the PBOC room to cut.”
Monetary policy divergence from other major economies, particularly the United States, and the weakening of the Chinese yuan have been the main constraints limiting Beijing’s efforts to ease its policy over the past two years.
However, the US central bank’s 50 basis point cut on Wednesday, which kicked off an anticipated series of interest rate cuts, has released some of China’s policy levers, analysts say.
Most new and outstanding loans in China are based on the one-year rate, while the five-year rate influences mortgage pricing.
Source: Ambito
I am an author and journalist who has worked in the entertainment industry for over a decade. I currently work as a news editor at a major news website, and my focus is on covering the latest trends in entertainment. I also write occasional pieces for other outlets, and have authored two books about the entertainment industry.
