Asian Shares Glow in Fed's Wake, Yen Anticipates BOJ's Move

Asian markets basked in the aftermath of the Federal Reserve's (Fed) latest rate cut, as regional shares rallied on hopes of a dovish monetary policy stance from the central bank. Meanwhile, the Japanese yen remained volatile, awaiting the Bank of Japan's (BOJ) policy decision. This article examines the impact of the Fed's rate cut on Asian currencies and markets, and explores how the BOJ's response may influence the USD/JPY exchange rate and regional trade dynamics.

Analysts at Standard Chartered Global Research anticipate a 25 basis points rate hike by the BOJ in December, bringing the base rate to 0.50% by the end of 2024. This hawkish outlook is driven by concerns over demand-side inflation, with real wages growing in June for the first time since March 2022. The BOJ may choose to act earlier to avoid losing the opportunity to normalize policy before dovish pressures kick in from potential Fed rate cuts, a global recession, and China's slowdown.

The BOJ's monetary policy decisions have historically played a significant role in shaping Asian shares' performance. Market expectations and sentiment towards the BOJ's policy decisions can sway investor confidence and risk appetite, ultimately driving regional equity markets. As the BOJ prepares to make its policy announcement, Asian markets await the potential implications for regional trade and economic growth.