Asia shares set for weekly gains on rate cut hopes

MSCI’s broadest index of Asia-Pacific shares outside Japan was off 0.1% but still looked set for a weekly gain of 0.7%

Asian shares were headed for weekly gains on Friday on hopes of further rate cuts around the world, while the Nikkei retreated from record highs after the Bank of Japan flagged a further unwinding of its massive stimulus policies.

The BOJ maintained short-term interest rates at 0.5% on Friday, as widely expected, but two members voted for a hike. It also decided to start selling its vast holdings of exchange-traded funds (ETF) and real-estate investment trusts (REIT).

The focus now falls on BOJ Governor Kazuo Ueda’s news conference, scheduled for 0630 GMT.

Data showed Japan’s core inflation ran at 2.7% in the year to August, marking the slowest pace in nine months, although it was still above the central bank’s 2% target.

Earlier in the week, central banks in Canada, the US and Norway cut interest rates, while the Bank of England held steady.

With the past week’s central banks decisions in the rear-view mirror, it’s clear that no one’s been comfortable to surprise, said James Rossiter, head of global macro strategy at TD Securities.

Ongoing uncertainty is clearly cutting policymakers’ risk appetites, though we expect cuts from many central banks at their next meetings, he added.

South Korea’s benchmark share index shed 0.6% but still hovered near a record level. It was up 1.3% for the week, bringing the total gain over the past two weeks to over 7%.

MSCI’s broadest index of Asia-Pacific shares outside Japan was off 0.1% but still looked set for a weekly gain of 0.7%, hovering not far from its four-year tops.

Chinese blue chips rose 0.3%, while Hang Seng was flat.

In foreign exchange markets, the dollar rebounded after the U.S. central bank’s first cut in nine months. The dollar index held at 97.28, finding some support after slumping to a multi-year low of 96.224 on Wednesday.

The pound held losses at $1.3557, having slipped 0.6% overnight as the BOE kept rates unchanged at 4%.

The dollar added 0.9% on the Norwegian crown overnight after the Norges Bank cut rates and signalled rates could continue to drop.