Asia remains bearish after wage hike, yen may rise: analysts

(Bloomberg) — Asian shares are likely to come under pressure on Friday after a weaker-than-expected U.S. payrolls report dashed earlier hopes of a slowing economy, analysts said.

The yen is likely to benefit from potential risk aversion, although it is unlikely to strengthen to 140 per dollar, said Jun Kato, chief market analyst at Shinkin Asset Management Co. in Tokyo. Hirofumi Suzuki, chief foreign exchange strategist at Sumitomo Mitsui Banking Corp. in Tokyo, said U.S. jobs data would pressure the dollar as they raise bets on a Federal Reserve interest rate cut.

Here are select comments from analysts;

Capital.com Inc. (Kyle Rodda, senior market analyst in Melbourne)

Most importantly, the US dollar rose, indicating that markets no longer expect a slowdown in the US economy and are preparing for further tightening of financial conditions in a recession.

Asian markets are turning bearish, with futures trading lower and fears rising of a similar turmoil to that which followed the non-farm wage hike in August.

Shinkin Asset Management Co. (Jun Kato, chief market analyst in Tokyo)

I don’t think the US jobs report was that bad. However, the US stock market was weak and USD/JPY was heavy on the upside at the 143 yen level, so risk aversion is likely to prevail again this week.

Since there were no major disappointments in the labor market, despite risk aversion, I don’t think USD/JPY will go below 140 yen.

Sumitomo Mitsui Banking Corp. (Hirofumi Suzuki, chief foreign exchange strategist in Tokyo)

A slightly weaker-than-expected US jobs report will not prompt the Fed to cut rates by 50 basis points at its September meeting. However, with previous revisions, the result leaves open the possibility of a 50 basis point rate cut depending on indicators from next month.

As a result, there will continue to be expectations of a significant reduction in interest rates in the future, and pressure on the dollar will increase in the foreign exchange market.

In particular, the USD/JPY is likely to head lower in the near future due to the increased volatility in Japanese equities over the past month. Depending on the stock market performance, there is a possibility that the dollar could drop below 140 yen by the end of the week.

Convera Europe SA (Boris Kovacevic, Goal Macro Strategist)

Investors hoping the non-farm payrolls report would provide some clarity on the direction of the US labor market and therefore Fed policy were disappointed.

Weak US growth and rising expectations of aggressive easing of interest rates by the Fed are reducing the attractiveness of the US dollar and helping push the Japanese yen below 143.

The US economy is slowing down and policy rates will eventually come down. These factors will support the yen. As long as the global soft landing narrative remains intact, Japanese equities could absorb a rise in the yen. Once it starts to break out, the pressure from the rising currency and weak global growth will weigh on equities.

More stories like this are available on bloomberg.com