Yen soars, Nikkei slides as rate hikes loom over Japan. Investors raced out of bets on Japan’s low interest rates, and Japanese markets were in disarray on Friday. The Nikkei was on the verge of seeing its highest weekly decline in a year, bonds were experiencing significant losses, and the yen was experiencing its most significant weekly gain in five months.

In addition to Japan, the MSCI’s broadest index of Asia-Pacific shares ex-Japan (.MIAPJ0000PUS) had a boost of 0.8%, while Treasury securities experienced a slight price decline. With exporters like automakers seeing the most significant declines, the Nikkei (.N225) had a daily decline of 1.8%, resulting in a weekly decline of 3.6%.

While traders waited for the release of the United States labor statistics later in the day, other movements were more subdued.

As short sellers are concerned that a long-awaited rebound may have finally begun, the yen significantly increased by more than two percent on Thursday and continued to be well-supported on Friday.

The yen reached its highest level against the dollar in four months on Thursday when it reached 141.6, and it remained stable at 144 to the dollar on Friday, gaining around 5% in three weeks.

“The direction is not a surprise,” said Bart Wakabayashi, the manager of the Tokyo division of State Street. “But this move and the speed of this move have blown away my expectations.”

Over the previous year, the Bank of Japan expanded and then relaxed the tolerance zone for 10-year rates twice. Governor Kazuo Ueda stated on Thursday that an “even more challenging” year is ahead, which traders saw as a warning that change is on the horizon. On December 19th, the Bank of Japan is scheduled to establish policy rates.

“The importance of the meeting on December 18–19 has increased, and we judge it’s fair to call December’s meeting a ‘live’ meeting,” analysts from Nomura commented in a note.

The bond market in Japan continued to be under pressure, with rates increasing down the curve and the shorter end of the curve heading towards its most significant weekly selloff since the beginning of the epidemic in March 2020.

The data indicating that Japan’s economy contracted at a quicker rate than was initially expected in the third quarter, as the household sector was confronted with more severe headwinds, complicated the view of the central bank and triggered a reduction in gains for the yen and a reduction in losses for JGBs.

PAYROLLS In broader markets, the emphasis is on whether or not the statistics for non-farm payrolls will show indicators that the labor market is slowing down. This is because the rate of unemployment claims in the United States matched expectations.

The economists anticipate that 180,000 new jobs were created in the previous month, and a positive surprise might trigger a robust reaction if traders reduce their bets on the Federal Reserve, reducing interest rates by more than 125 basis points in the next year.

If the Federal Reserve decides to lower the interest rate aggressively, it will result in a recession and a significant decline in inflation. According to Bob Savage, the head of markets strategy and analytics at BNY Mellon, “the numbers game of NFP (non-farm payrolls) suggests that we are still a long way from those levels.”

At the announcement that Santos (STO.AX), an Australian gas producer, was discussing a potential merger with Woodside (WDS.AX), a larger competitor, the company’s shares increased by 6%. The shares of Woodside decreased by 0.5%.

As a result of the rise in the value of the yen, the dollar index is expected to remain unchanged at 103.62 after the week. As of the end of the week, the euro was trading at $1.0785.

As a result of a slowing economy and traders’ impression that the central bank is turning dovish, the Australian dollar was on the verge of breaking a three-week winning streak with a 0.9% dip this week to $0.6613. This was because the economy was slowing down.

Thursday was when Brent oil futures reached their lowest point in five months, although they managed to recover marginally and reach $75.17 per barrel in Asia trading. Oil prices are expected to drop by 4.6% this week.

The price of gold hovered at $2,032 per ounce even throughout the week before falling back down.

As a result of the hope that a bitcoin exchange-traded fund (ETF) could be approved and the expectation that U.S. interest rates have reached their highest point, bitcoin is aiming for an eighth consecutive weekly gain. Previously, it purchased $43,437.