Dollar Gains Underpin Nikkei 225 Index, Risk Conditions Hold Steady

A firmer dollar helped underpin Japanese equities on Friday despite inevitable caution ahead of comments at the Jackson Hole symposium.

US equities closed lower on Thursday with further underlying reservations surrounding the debt ceiling, although there was no significant negative impact on Asian equities.

Japanese nationwide core inflation rose to 0.5% for July from 0.4% the previous month which was in line with consensus expectations while the August Tokyo reading strengthened to 0.4% from 0.2% which was slightly stronger than expected.

There was still little confidence in the 2% inflation target being reached and there was little overall market impact.

The dollar was able to make gradual headway during Thursday with USD/JPY moving above the 109.50 level and a weaker yen helped underpin the Nikkei index on Friday.

After a sharp retreat during US trading, oil prices also recovered ground which helped underpin Japanese stocks.

Risk conditions were relatively benign on Friday which helped underpin stocks and there was support from Chinese equities which posted firm gains on a favourable reaction to corporate earnings.

The Nikkei index opened slightly higher and edged higher during the morning session, although narrow ranges dominated. Although there was a sharp gain early in the afternoon session, gains faded slightly as the dollar failed to extend a recovery.

At the close, the Nikkei index rose 98.84 points and 0.51% at 19,452.61.

Reaction to the Jackson Hole symposium will be an important factor on Monday with a particular focus on the dollar’s reaction to Yellen’s commentary.

Nikkei 225 Index 4-Hour Chart

nikkei25-08-17

Tim is a contributing author to EconomicCalendar.com. He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.