Global markets surged while the yen tumbled more than 2% against the dollar after Bank of Japan Deputy Governor Shinichi Uchida pledged not to raise interest rates amid unstable markets. Uchida’s dovish stance came in response to significant financial market volatility in Japan, reassuring investors that the BoJ would maintain its accommodative monetary policy.
In the U.S., traders also tempered their expectations for Federal Reserve rate cuts this year. Swaps now indicate around 105 basis points of easing, down from the 150 basis points anticipated on Monday. This shift in sentiment pushed Treasury 10-year yields up by two basis points in Asian trading, following a 10 basis point jump to 3.89% on Tuesday.
Oil prices also saw an uptick, buoyed by the overall positive market sentiment.
The Bank of Japan’s decision to maintain a dovish stance amidst market turbulence and the recalibration of rate cut expectations in the U.S. are key factors driving the current market dynamics. Investors are now closely watching central bank actions and economic data for further cues on the global economic outlook.