Yen Rises as BOJ Highlights Currency Concerns Amid Inflation

The yen edged higher to 142.30 per dollar after the Bank of Japan referenced financial and foreign exchange markets, implying that yen movements could now have a greater impact on inflation. The Nikkei rose 1.9%, following Wall Street’s rally spurred by the Federal Reserve’s rate cut.

Equities

The FTSE 100 rose 0.9% on Thursday after the Bank of England decided to keep interest rates steady at 5%, while maintaining its bond reduction plan. Mid-cap stocks on the FTSE 250 gained 1.6%. The BoE’s decision came as inflation pressures in the UK showed signs of easing, with policymakers adopting a cautious approach towards further rate cuts. Notably, the British pound reached its highest level since March 2022.

Among individual stocks, Ocado shares increased by 2.8% after its retail arm improved its revenue forecast for the 2023-2024 fiscal year. On the other hand, S4 Capital shares dropped 5.9% following a downgrade in its revenue outlook due to weaker demand from tech clients.

In the US, the S&P 500 surged by 1.7% to a record high after the Federal Reserve's 50 basis point rate cut. The Dow Jones Industrial Average also hit a new record, closing above 42,000 points for the first time. Tech stocks continued their strong performance, with Nvidia climbing 4%, Apple and Meta each up nearly 4%, and Tesla surging by more than 7%. The PHLX semiconductor index gained 4.3%, driven by Nvidia’s performance.

Large US banks saw significant gains following the Fed's decision, with Wells Fargo up 3%, Citigroup rising 2.6%, and Bank of America advancing 2.3%. Goldman Sachs gained 3%, and Morgan Stanley was up 1.3%. These gains came after the Fed’s cut, which lowered borrowing costs and improved sentiment in the financial sector.

Elsewhere, in extended trading, FedEx saw a 10% decline after the company reduced its revenue target for fiscal year 2025. The Russell 2000 index, representing small-cap companies, climbed 2.1%, as investors anticipated lower operating costs and higher profits following the rate cut.

The day’s trading saw higher-than-average volume, with 12.3 billion shares changing hands, surpassing the 10.8 billion share average from the last 20 sessions.

Forex & Commodities

The yen trimmed its losses after the Bank of Japan struck a positive tone on growth, with the dollar falling 0.3% to 142.21 yen. The BOJ left its interest rate unchanged at 0.25%, with speculation about a possible rate hike later in the year. Core inflation in Japan increased to 2.8% in August. The euro gained 0.9% for the week to $1.11635, close to its August peak.

In the US, the dollar came under pressure as markets priced in more aggressive rate cuts from the Federal Reserve. The Fed’s 50-basis-point cut this week has led markets to expect further cuts, with rates possibly reaching 2.85% by the end of 2025. The US dollar index held at 100.59, just above a one-year low.

Gold prices rose 1.2% to $2,590.47 per ounce, nearing the $2,600 mark after the Fed’s rate cuts. Spot silver jumped 3.5% to $31.11, while platinum gained 2.3% to $990.45 and palladium rose 2.6% to $1,089.25.

Oil prices rose more than 1% on Thursday, with Brent crude settling at $74.88 per barrel and US crude at $71.95. Declining crude inventories in the US and rising tensions in the Middle East helped support the rally, despite concerns about weak demand in China.