By Jamie McGeever
(Reuters) - A look at the day ahead in Asian markets.
Asian FX traders will be on heightened Japanese intervention alert again on Tuesday after Tokyo reportedly stepped into the market on Monday, catapulting the yen up from a 34-year low of 160 per dollar and onto a roller-coaster ride of volatility.
It was the dollar's breach of 160 yen that appears to have snapped the Ministry of Finance's patience. The yen's rebound was perhaps exaggerated because Japan was closed for a public holiday on Monday - the dollar fell as low as 154.50 yen - so market liquidity will return to more normal levels on Tuesday.
Chinese stocks have opened the week strongly, hitting a six-month high as property sector sentiment improves, and Tesla (NASDAQ:TSLA) shares' 15% surge on Monday following Elon Musk's visit to Beijing can only be supportive of Chinese markets and tech more broadly.
A pullback in U.S. bond yields - 5.00% on the two-year yield once again proving to be a firm ceiling - will also help cement the upbeat backdrop to the market open in Asia on Tuesday.
The regional economic data and events calendar is overflowing with potential market-moving releases, included among them: Chinese PMIs, Japanese retail sales, unemployment and industrial production, Bank of Korea meeting minutes and Australian retail sales.
The currencies of all these countries will be sensitive to these releases, particularly in light of the yen's roller-coaster ride and Japan's reported yen-buying intervention on Monday.
The yen ended up strengthening 1.5% against the dollar on Monday, its biggest one-day rise this year, but that barely clawed back the ground lost in its 1.6% slump on Friday, the day of the Bank of Japan's policy announcement.
Indeed, at around 156.00 per dollar, the yen goes into Asian trading on Tuesday slightly weaker than it was before the BOJ's decision. If Tokyo did intervene, it has clearly managed to relieve the selling pressure on the yen, but how long that lasts remains to be seen.
The last time Japan intervened in the FX market was October 2022, when it spent around $40 billion to buy yen when the currency was around 152.00 per dollar. It took more than a year for the yen to get back to that level, and a further five months to break it.
The current economic climate and market conditions are different of course, and perhaps Japan's resolve is stronger now than it was then.
Comments from Japan's top currency diplomat, Masato Kanda, were pretty pointed: "The developments we're seeing now ... can be described as speculative, rapid and abnormal volatility. The damage such moves inflicts on the economy is hard to overlook."
One suspects yen bears will be looking over their shoulders quite a bit in the coming days.
Here are key developments that could provide more direction to markets on Tuesday:
- China manufacturing and services PMIs (April)
- Japan retail sales, unemployment, industrial output (March)
- Bank of Korea meeting minutes
(Reporting and Writing by Jamie McGeever)