Japanese Yen May Rise On Asian Geopolitical Risks, BoJ Rate Decision

Wall Street stocks ended on an upbeat note with the Dow Jones, S&P 500, and Nasdaq indices closing 2.13, 1.34, and 0.94 percent higher, respectively. In the S&P, energy was the best-performing sector, specifically the Oil & Gas Equipment & Services sub-component. Not entirely by coincidence, Brent was up 0.80 percent for the day along with the petroleum-linked Norwegian Krone and Swedish Krona.

Foreign exchange markets were somewhat of a mixed bag with the Canadian, New Zealand and Hong Kong Dollar as the session’s biggest losers. The US Dollar, Japanese Yen, and Swiss Franc were mixed while the Euro was mostly in the green. The latter’s strength appears to be in anticipation of hopeful news ahead of the ECB rate decision and key EU summit later this week.

Risk appetite was buoyed after investment bank giant JPMorgan reported record-breaking trading revenue despite the worst recession since the 1930’s. This put the haven-linked US Dollar on the defensive and further amplified EUR/USD’s gains. The spread of credit default swaps on sub-investment grade corporate debt slightly narrowed, further underscoring what appeared to be a buoyant session.

After markets closed, US President Donald Trump gave a press briefing on Chinese-related policies. He said the US is ending its preferential treatment for Hong Kong and will no longer export sensitive technologies. He added that if countries want to do business with the US, they cannot work with the Asian tech giant Huawei. Other comments included holding China accountable for the virus and “unleashing” it upon the world.

WEDNESDAY’S ASIA-PACIFIC TRADING SESSION

Market sentiment appears to be aggressively risk-on despite the President’s comments and the possibility of retaliation by Beijing. Crude oil and a slew of other growth-oriented assets like copper, AUD, NZD, and emerging-market FX may initially rally at the expense of the US Dollar and Japanese Yen.

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