Asia wrap: Asia markets riding high

Asia’s markets are riding high, as the ripple effect from the Fed’s jumbo rate cut suggests it’ll be much easier for central banks across the region to cut rates, potentially fueling growth and boosting equity market valuations.

With the Fed taking the plunge, these more cautious central banks may finally feel encouraged to join the rate-cut party.

The hesitation, of course, is due to the risk of currency depreciation. Lowering rates ahead of the Fed can devalue national currencies, making imports more expensive and potentially reigniting inflation. However, the Fed’s commitment to what appears to be a prolonged easing cycle should ease some of these fears. With the Fed likely set for an extended period of cuts, central banks across Asia can act without fearing a significant currency fallout from their actions alone.

That said, the yen took a hit today, spooked by jittery fresh USDJPY shorts reacting to short-term market noise. However, the broader trend remains clear—USDJPY is likely headed lower in the short to medium term as BoJ and Fed policies diverge, providing a strong guidepost for traders moving forward.