Asian investors looked to a key US Federal Reserve meeting to ease turbulence in regional stock markets yesterday as the dollar and euro reversed losses against the yen.
With the US central bank widely expected to cut interest rates further, major Asian markets rebounded strongly after dizzying drops a day earlier.
Tokyo soared 6.41 percent by the close and Hong Kong rocketed 11.3 percent in afternoon trade after losing 12.7 percent on Monday.
But Singapore’s Straits Times Index, which was closed on Monday for a public holiday, tumbled almost 6 percent by noon while Australian shares closed down 0.4 percent.
Markets remain in turmoil despite the US announcement of a US$125 billion capital injection into nine top banks under its huge bailout plan, with attention now turning to the Federal Reserve meeting.
Meanwhile, the yen fell sharply against major currencies amid the rally from Japanese share prices.
The yen, which has soared in recent weeks as people dump risky investments, dropped below 95 to the dollar and 120 against the euro.
Last week the dollar fell to the upper ¥90 level for the first time since August 1995, while the euro hit a six-year low below ¥114.
Bringing sighs of relief around Asia’s largest economy yesterday, the dollar rose to ¥95.65 in late Tokyo trade, up from ¥93.64 in New York late on Monday. The euro rose to ¥120.06 from ¥116.45.
Amid the continuing turmoil, Japan’s top broker Nomura Holdings, which is buying the Asian and European operations of failed Wall Street giant Lehman Brothers, said it made a net loss of ¥149.5 billion (US$1.57 billion) in the six months to September.
Japan’s Honda Motor Co said its net profit slipped 19.1 percent in the first half and cut its full-year forecasts as a still strong yen undercut its performance.
European Central Bank (ECB) President Jean-Claude Trichet said another cut in interest rates is “possible” early next month as fears of a global recession continue to wreak havoc on international markets.
The ECB cut its main lending rate by 50 basis points to 3.75 percent on Oct. 8 as part of rare concerted action by leading central banks to avert a collapse of the banking system and to shore up credit.
British Prime Minister Gordon Brown was to meet French President Nicolas Sarkozy yesterday ahead of an EU summit in Brussels next week and a Group of 20 meeting in Washington on Nov. 15.
France now holds the rotating presidency of the EU, which is battling to agree on a united strategy on how to deal with the global credit crunch and economic slowdown.
German Chancellor Angela Merkel is leading opposition to Sarkozy’s proposals, which include an “economic government” for the 15-nation eurozone and setting up national sovereign wealth funds.
Gloomy economic news continued with a UN regional body revising down its growth prediction for Latin America and the Caribbean from 4 percent to 3 percent because of a drop in investments, remittances and demand for raw materials.
Icelandic Prime Minister Geir Haarde said he had asked his fellow Nordic countries for much needed funds at a summit on the crisis that has pushed his nation to the brink of bankruptcy.