By Gregor Stuart Hunter
SINGAPORE (Reuters) -The yen regained its footing and the U.S. dollar veered between gains and losses against most of its biggest peers in volatile trading in Asia on Wednesday that sent investors to safe havens like gold and Treasury bonds after a days-long global selloff in stocks.
The yen advanced 0.1% after hitting a nine-month low against the dollar on Tuesday and was last fetching 155.37 yen to the dollar.
The dollar index, which measures the greenback’s strength against a basket of six currencies, fluctuated as U.S. Treasury bonds drew bids, even amid rising uncertainty over the Federal Reserve’s next move. The gauge edged 0.1% lower at 99.523.
The dollar had strengthened alongside demand for Treasury bonds even as odds of a Fed rate cut fell, which likely indicated safe-haven buying, analysts from DBS in Singapore said in a research report.
“Investors may be seeking safety from U.S. tech stocks, which have remained weak on persistent worries about stretched AI overvaluations,” they wrote.
Global equity markets have been hit hard this week, with the S&P 500 on a four-day losing streak on concerns about valuations of AI stocks and U.S. equity futures extending losses in Asian trading on Wednesday. Chip giant Nvidia is due to release its third-quarter results later on Wednesday.
Amid the rout in risk assets, the Australian dollar fell 0.4% to $0.6483, while the kiwi slipped 0.5% to $0.56305.
The euro stood at $1.1586, edging 0.1% higher after hitting a one-week low in U.S. trade.
Sterling was up 0.1% at $1.3151.
JAPANESE GOVERNMENT BOND SELLOFF
Bank of Japan Governor Kazuo Ueda will meet with key government ministers later on Wednesday, including Finance Minister Satsuki Katayama, as markets speculate about central bank policymaking under the new administration of Prime Minister Sanae Takaichi.
Japanese government bonds (JGBs) were sold off on Wednesday, sending benchmark yields to a 17-year high and 40-year yields to a new record, as concerns swirled about the size of Takaichi’s stimulus package. However, a closely-watched auction of 20-year bonds proceeded without incident.
Swaps pricing indicates the market attributes a 74% probability that the BOJ’s next move is a hold at its meeting on December 19, versus only 26% for a hike.
U.S. JOBLESS CLAIMS SURGE
Adding to the sense of market anxiety, initial jobless claims data released on Tuesday showed the number of Americans on jobless benefits surged between mid-September and mid-October.
“This was the first data release by the Department of Labor since the U.S. government shut down its federal operations on the first day of October, and it wasn’t great,” said Tony Sycamore, market analyst at IG in Sydney.
The “more important test” will come with the delayed release of Thursday’s nonfarm payrolls release for September, he added.
Traders are inching up bets on monetary easing from the Federal Reserve at its next meeting, although there is still uncertainty given division within the central bank on whether to delay a rate cut.
The market now considers the event to be a coin toss. Fed funds futures are pricing an implied 49% probability of a 25-basis-point cut at the December 10 meeting, compared to a 42.4% chance a day earlier, according to the CME Group’s FedWatch tool.
Richmond Federal Reserve President Thomas Barkin said on Tuesday he hopes coming data and ongoing community interviews will help clarify where the economy is heading.
U.S. President Donald Trump renewed his attacks on Federal Reserve Chair Jerome Powell on Tuesday, saying “I’d love to get the guy currently in there out… but people are holding me back.” Powell’s term as Fed chair is up in May.
Trump will meet the final shortlist of candidates for the next Fed chair after Thanksgiving and he could announce his pick before Christmas, U.S. Treasury Secretary Scott Bessent said on Tuesday.
Capital flows data from the Treasury Department showed Japan’s holdings increased for a ninth straight month in September. Japan remained the largest non-U.S. holder of Treasuries with $1.189 trillion, its biggest holdings since August 2022.
(Reporting by Gregor Stuart Hunter; Editing by Shri Navaratnam and Jamie Freed)
