Morning Wrap (19.03.2024)

Indices in the Asia-Pacific region are experiencing a mixed session on the second day of the week. Indices in Japan, Australia, and Singapore are gaining, while markets in China and Vietnam are losing.

The Bank of Japan decided on Tuesday to abandon negative interest rates, implementing a rate hike for the first time in 17 years. This move followed a strong increase in wages, which bolstered the BOJ's belief that a healthy wage-price cycle is beginning in Japan.

7 out of 9 members voted for the interest rate hike. The Bank of Japan raised the short-term interest rate from -0.10% to a range of 0.00-0.10%.

The BOJ also abandoned its Yield Curve Control (YCC) policy, in place since 2016, which limited long-term interest rates around zero.

The BOJ stated it will continue to buy the same amount of government bonds as before and will increase purchases in case of a sharp increase in yields.

Additionally, the BOJ decided to cease purchasing risky assets, such as ETF funds and Japanese real estate investment funds.

Despite the historic decision to raise rates, the Japanese Yen (JPY) is the weakest currency in the first part of the day. USDJPY even loses -0.85% and returns above the 150.000 level.

The weakness of the JPY can be attributed to the selling of facts. The decision was highly anticipated due to many leaks over the last week. Even though the BOJ decided to end negative interest rates, it is still only a slight shift of short-term rates just above zero.

Similarly, with Yield Curve Control, the BOJ decided to abandon it but still maintains bond purchases and noted that it is ready to intervene if yields rise too quickly.

The BOJ also did not provide more precise guidance on future plans and the pace of normalization.

The Reserve Bank of Australia (RBA) left interest rates unchanged at 4.35%, noting that economic growth has dramatically slowed. The RBA has made 13 interest rate hikes since May 2022.

The Board of the Reserve Bank of Australia remains determined to bring inflation back to the target, which remains high but is moving in the right direction. The Board does not rule out anything regarding interest rates.

Nevertheless, the Australian dollar AUD is the second weakest currency today after the JPY. The bank noted that it does not rule out any decision, which markets could even interpret as dovish, speculating on interest rate cuts. Currently, expectations for the first cut foresee a meeting in September.

Nvidia announced during the CEO's speech at the Nvidia GTC 2024 conference a new model of graphic processors, Blackwell. The flagship Blackwell "superchip," GB200, is set to be released later this year. It possesses an extraordinary scaling ability, strengthening Nvidia's position as a leader in the artificial intelligence race.