The MSCI broadest index of Asia-Pacific shares outside Japan's firmed by 1.5%, while Chinese blue chips increased by 0.6%. Japan Nikkei edged up 0.5% as the Japanese government revised its growth forecast for the upcoming fiscal year based on hopes for higher business expenditure and substantial wage increases.
Japanese Bond Yields Reach New High
Investors are still grappling with the implications of the Bank of Japan’s unexpected decision to allow JGB yields to rise this week. Ten-year government bond yields have soared 23 basis points this week, reaching 0.480% - the highest since July 2015 - and nearing the BOJ new ceiling of 0.5%. Analysts from Capital Economics stated that lower investment returns may not carry systemic risks but will affect the value of assets owned by Japanese investors, especially insurance firms and pension funds.
Impact of Bank of Japan’s Shock Decision
The shock BOJ decision has caused the yen to strengthen significantly this week, with the dollar currently down at 131.84 yen, having lost 3.6%. The euro has also dropped 3.0% on the yen at 140.26. Capital Economics now forecasts the dollar to fall further to 125 yen next year. The surge in the yen has been beneficial for gold, which rose 1.4% this week to $1,818 an ounce.
Yen Strengthens, Dollar and Euro Slide
The dollar retreat has seen the euro move slightly higher against the greenback at $1.0640, while sterling is struggling after British public borrowing hit a record in November and strikes across the country darkened the U.K. economic outlook. The pound is trading at $1.2114 after hitting a three-week low overnight.
Gold Soars as Dollar Retreats
The pullback in the dollar has been a boon for gold, which was up 1.4% on the week so far at $1,818 an ounce. Oil prices have also rallied after data showed a larger-than-expected draw in U.S. crude stockpiles. Brent gained 42 cents to $82.62 a barrel, while U.S. crude rose 47 cents to $78.76 per barrel. The Rally in oil prices could be tempered, however, by an impending snowstorm that's expected to blanket much of the United States.
