Yen slides to fresh 34-year low, stocks rally

The yen slumped to a fresh 34-year low against the dollar on Monday, fuelling expectations Japanese authorities would step in to support their currency for the first time since late 2022.

The dollar's strengthening comes as another forecast-topping US inflation report dented hopes for Federal Reserve interest rate cuts this year.

The yen slipped to 160.17 to the greenback in morning trade, stirring speculation that Japanese authorities would intervene to arrest its slide.

The currency has come under renewed pressure after the Bank of Japan refused to tighten monetary policy further at its meeting last week.

Officials have repeatedly said they are ready to step in if there are wild movements in the exchange rate, citing speculators as a key issue.

However, observers were sceptical that a first intervention since late 2022 would have much of an impact.

"Expectations of intervention having a sustained impact may disappoint given macro fundamentals do not support a sudden shift to a hawkish monetary stance," said National Australia Bank's Tapas Strickland.

Meanwhile, equity markets rose following a rally on Wall Street as strong earnings offset the hotter print on the personal consumption expenditures (PCE) price index.

A rally in tech titans -- boosted by forecast-beating reports from Microsoft and Alphabet -- helped push all three main indexes higher in New York, with the Nasdaq piling on two percent.

The readings soothed worries that the recent markets rally, which has been partly fanned by optimism over earnings, may have been overdone.

The advance in the PCE followed a third straight jump in the consumer price index.

That, along with push-back by Fed decision-makers warning against cutting too soon leading investors revise their outlook for how many reductions there would be this year.

They now expect just one, having priced in as many as six at the start of 2024.

The bank's latest policy announcement this week will be pored over for fresh guidance on officials' plans for monetary policy.

"With all measures of US consumer prices showing a steep acceleration over the past three to four months, the (policy board) is bound to row back hard from its earlier predictions of meaningful policy easing this year," said Societe Generale economists.

However, they added: "That said, markets have already scaled back pricing of rate cuts drastically, so unless chair (Jerome) Powell plays up the possibility of rate hikes, the market damage is likely to be modest."

After the positive lead from Wall Street, most of Asia's markets advanced.

Hong Kong extended its rally into a sixth straight day, while Shanghai, Sydney, Seoul, Taipei, Manila, Jakarta and Wellington were also in the green.

Key figures around 0230 GMT
Hong Kong - Hang Seng Index: UP 1.0 percent at 17,827.64
Shanghai - Composite: UP 0.6 percent at 3,105.26
Tokyo - Nikkei 225: Closed for a holiday
Dollar/yen: UP at 159.02 yen from 157.89 yen on Friday
Euro/dollar: UP at $1.0715 from $1.0699
Pound/dollar: UP at $1.2523 from $1.2496
Euro/pound: DOWN at 85.57 pence from 85.60 pence
West Texas Intermediate: DOWN 1.0 percent at $83.05 per barrel
Brent North Sea Crude: DOWN 0.9 percent at $87.43 per barrel
New York - Dow: UP 0.4 percent at 38,239.66 (close)
London - FTSE 100: UP 0.8 percent at 8,139.83 (close)