Asian stock markets experienced a slight climb on Tuesday, yet failed to surpass the month's peak levels. This comes as mixed signals from U.S. Federal Reserve officials cast doubts on the timeline for anticipated interest rate reductions. The possibility of Japan intervening to stabilize the yen exerted minor pressure on the dollar, which nonetheless gained against the yuan amid speculation that China might accept a weaker currency.
The MSCI's broadest index of Asia-Pacific shares outside Japan saw a 0.6% increase, led by gains in South Korean chipmakers SK Hynix and Samsung Electronics, which propelled the Kospi index up by 1.2%. Meanwhile, Japan's Nikkei index remained stable, as did the yen, holding at 151.31 per dollar.
Recent comments from Fed officials have introduced uncertainty into the policy outlook. Chicago Fed President Austan Goolsbee indicated plans for three rate cuts this year, while Fed Governor Lisa Cook advocated for caution, and Atlanta Fed President Raphael Bostic revised his forecast to just one cut. This diversity of opinions comes as the market awaits the next U.S. inflation data, expected on Good Friday when many markets will be closed.
Interest rate futures now predict roughly three Fed rate cuts throughout the year, with a significant chance of the first cut occurring in June. U.S. two-year yields, a measure of short-term interest rate expectations, experienced fluctuation, ultimately dropping by 4.5 basis points in Asia to 4.58%.
On the foreign exchange front, rhetoric from Japan's top currency diplomat, Masato Kanda, helped stabilize the yen. Kanda described the yen's recent depreciation as "strange" and "speculative," despite the Bank of Japan's interest rate increase last week. The yen remains near three-decade lows against the dollar.
China's yuan faced downward pressure, crossing the weak side of its 200-day moving average at 7.2165 per dollar after a stronger-than-expected fixing. The recent sharp decline in the yuan has led to speculation about China potentially easing its currency control.
In commodities, gold and oil prices remained relatively stable, with spot gold priced at $2,169 an ounce and Brent crude futures slightly up by 24 cents to $86.99 a barrel. Bitcoin maintained its position just above $70,000 following a significant increase on Monday.
