SINGAPORE/JAKARTA: Asian shares extended their rally on Friday, bathing in the afterglow of an outsized interest U.S. rate cut, while the yen edged higher as the Bank of Japan held rates steady and stayed upbeat on the economy.
European sharemarkets are, however, set for a lower open, with EUROSTOXX 50 futures slipping 0.3% and FTSE futures falling 0.5%. Wall Street futures were also slightly lower, after the S&P 500 surged to a record close on Thursday.
In China, the central bank kept its benchmark lending rates on hold, countering expectations for a move lower. Chinese shares were an outlier in the region, with blue chips down 0.5%. The onshore yuan strengthened to the highest in nearly 16 months, leading to intervention by state banks to prevent it from appreciating too fast.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.6% to the highest in two months, tracking overnight gains on Wall Street. The index was headed for a weekly gain of 2.4%.
The Nikkei rose 1.5% and was up 3.1% for the week.
In a short statement, the BOJ kept its short-term rate steady at 0.25% on Friday as widely expected, but upgraded its view on consumption. Notably, it mentioned the exchange rate was more likely to affect prices than in the past.
The yen has rallied 14% from its low in early July but its ascent has met some resistance at the key 140 per dollar level. It was last up 0.3% at 142.21 per dollar, but still down 1% on the week even in the face of broad dollar weakness.
Data released on Friday showed Japan's core inflation accelerated for a fourth consecutive month, reinforcing the case for further policy tightening.
"The yen has become stronger and the market has not completely settled down, so I think it is appropriate to leave rates unchanged for now," said Kazutaka Maeda, an economist at Meiji Yasuda Research Institute.
"The need for hikes as a measure to counter the weak yen has somewhat decreased. Rather, the BOJ will look at wages and prices and make adjustments in a way that will maintain a virtuous cycle of wages and prices."
Investors will now focus on any hints from Governor Kazuo Ueda on the timing and pace of further hikes at the post-meeting press conference at 0630 GMT.
Overnight, Wall Street finally had the time to digest the Federal Reserve's first rate cut. With more easing to come, investors are wagering on continued U.S. economic growth and better-than-expected jobless claims data added to the view that the labour market remained healthy.
Markets imply a 40% chance the Fed will cut by another 50 basis points in November and have 73 basis points priced in by year-end. Rates are seen at 2.85% by the end of 2025, which is now thought to be the Fed's estimate of neutral.
In foreign exchange markets, the dollar was pinned near one-year lows against major currencies. The British pound was buoyant at $1.3297, having rallied 0.7% overnight to the highest since March 2022 as the Bank of England held rates steady.
Short-dated U.S. Treasuries held close to two-year highs. Two-year Treasury yields slipped 3 basis points to 3.57% on Friday but were up 3 bps for the week.
Commodities also held onto their weekly gains. Gold hovered near a record high at $2,592.67 an ounce and oil prices are set for their second straight week of gain.
Brent futures slipped 0.3% to $74.67 a barrel, but are still up 4.2% this week. - Reuters
