Yen Surges as BOJ Maintains Policy; Asian Stocks Sink With Oil 

• Fed scaled back rate-hike outlook, saying Brexit a concern
• Kiwi strengthens on GDP data as gold rallies with silver

The yen soared and Japanese stocks tumbled after the nation’s central bank refrained from easing monetary policy. Shares elsewhere in Asia dropped with European equity futures as oil fell for a sixth day, while haven assets including gold and sovereign bonds advanced.

Japan’s currency strengthened past 105 per dollar for the first time since September 2014 and the Topix slid to a four-month low. The MSCI Asia Pacific excluding Japan dropped to its lowest in three weeks as U.S. crude slipped below $48 a barrel. Gold climbed for a seventh day and 10-year bond yields sank to records in Australia, Japan and South Korea. The greenback extended Wednesday’s slide after the number of Federal Reserve officials who see just a single rate hike this year rose to six, from one in March.

“There were some who had priced in possible easing,” said Norihiro Fujito, a strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “But with the Brexit vote looming next week, it was also possible that any effects from easing would only last a week.”

Japanese stocks are among the world’s worst performers this year, while the BOJ’s negative interest-rate policy adopted in January has failed to curb the yen’s surge. The BOJ’s decision came less than 12 hours after the Fed’s policy review and added to volatility in global markets as a British vote nears on membership of the European Union. The odds of the Fed raising key borrowing costs this year are now below 50 percent, with Chair Janet Yellen saying that the U.K.’s June 23 referendum was a factorin the central bank’s decision to hold rates steady.

About 28 percent of economists in a Bloomberg survey had forecast additional easing at this BOJ meeting, with 55 percent looking to the next gathering on July 29, when the central bank will update its inflation projections.

Stocks

The Topix slid 2.8 percent as of 7:12 a.m. London time, having been 1.2 percent lower ahead of the BOJ’s announcement. MSCI’s gauge of shares elsewhere in Asia lost 0.9 percent as benchmarks declined across the region, led by a 2 percent drop in Hong Kong’s Hang Seng Index.

Futures on the Euro Stoxx 50 Index slumped 1.5 percent and contracts on the U.K.’s FTSE 100 Index sank 1.1 percent. S&P 500 futures slipped 0.4 percent, after the gauge declined for a fifth day on Wednesday.

Updates on consumer price indexes for the euro area and the U.S. are due Thursday, while the U.K. will release retail sales figures. In addition, euro-area finance ministers will meet in Luxembourg to look at Greece’s progress in meeting its bailout conditions. Oracle Corp. is among companies scheduled to report earnings.

Currencies

The yen jumped 1.8 percent to 104.12 a dollar, strengthening for a fifth day. The currency gained against all 31 major peers after the BOJ refrained from adding any stimulus that could slow its advance.

“The BOJ was facing too much of a headwind in the market,” said Yunosuke Ikeda, head of Japan foreign-exchange research at Nomura Securities Co. “Even if the BOJ had come out with additional stimulus expansion, it would probably not be able to fight this headwind, making such steps ineffective. Ineffective easing would just question their credibility, so they probably decided not to act this time.”

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, fell 0.4 percent after sliding 0.3 percent on Wednesday. Fed officials continue to forecast two 25 basis-point rate hikes this year, after leaving the target range for the benchmark interest rate unchanged at 0.25 percent to 0.5 percent.

The pound weakened 0.2 percent, the Swiss franc strengthened 0.3 percent and Indonesia’s rupiah rose 0.4 percent before central bank policy meetings at which interest rates are forecast to be left unchanged. The kiwi jumped 0.7 percent after data showed New Zealand’s economy expanded 2.8 percent last quarter from a year earlier, exceeding the 2.6 percent growth projected by analysts.

Commodities

Crude oil dropped 1 percent to $47.54 a barrel in New York, sliding for a sixth day amid signs that global supply disruptions are fading. Output in Canada is expected to ramp up this month after wildfires cut production, while Nigerian militants are pursuing peace talks with the government.

Gold rose as much as 1.4 percent and topped $1,300 an ounce for the first time in six weeks as reduced prospects for monetary tightening in the U.S. spurred demand for non-interest-bearing assets. If Britons vote to exit the EU on June 23, the price will jump to $1,350 within a week, according to a Bloombergsurvey of 22 traders and analysts. Should a majority choose to remain in the bloc, bullion might slide to $1,250, the survey showed.

“From the cautious tone set by Yellen last night and the Fed, we saw a weaker dollar and stronger gold,” said Ric Spooner, chief analyst at CMC Markets in Sydney. “As well as that, concerns remain about Brexit. The market is looking to the possibility of volatility and safe-haven assets continue to do well.”

Silver jumped 1.7 percent, contributing to a 28 percent gain for the year, after holdings in exchange-traded funds backed by the metal climbed to a record.

Bonds

The yield on Australia’s 10-year bonds fell six basis points to 2.01 percent, having earlier dipped below 2 percent for the first time. The rate on similar-maturity U.S. Treasuries fell three basis points to 1.54 percent, headed for the lowest close since August 2012, and South Korea’s dropped to an unprecedented 1.58 percent.

Japan’s 10-year yield was minus 0.205 percent, having dropped as low as minus 0.21 percent before the BOJ decision was announced. Yields on tenors ranging from two to 40 years sank to all-time lows over the past two days.

Noble Group Ltd.’s dollar bonds due January 2020 dropped for a fifth day, lifting their yield by 25 basis points to 13.75 percent, after the Hong Kong-based company’s credit rating was cut by S&P Global Ratings for the second time in six months.

Source: Bloomberg

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