Berliner Boersenzeitung - Yen rallies after Japan hikes rates, stocks rise before Fed

Oil prices surged almost three percent after Hamas said its political leader was killed in an Israeli air strike in Iran, stoking supply fears in the crude-rich Middle East.

London equities advanced on the eve of a possible rate cut from the Bank of England owing to a sharp slowdown in British inflation.

In the eurozone, where the European Central Bank has already started to cut borrowing costs, Frankfurt and Paris stocks were also sharply higher.

Later on Wednesday, the Federal Reserve is expected to keep US interest rates at a two-decade high, but traders will watch for hints about a September reduction.

In contrast in Tokyo, the Bank of Japan has this year shifted its focus as prices continue to rise at rates above its target, after more than a decade of ultra-loose monetary policy to kickstart the stuttering economy and flatlining inflation.

That saw rates lift in March to around zero to 0.1 percent -- the first hike since 2007 -- marking a shift away from a long-running campaign of negative rates. Wednesday's decision put them at 0.25 percent.

- 'Clear hawkish message' -

The BoJ news pushed the yen to strengthen to as much as 150.07 against the dollar, which was a level last seen in March.

"The rate hike was not a complete surprise but, being only the second interest rate increase in 17 years, it delivers a clear hawkish message," said ActivTrades analyst Ricardo Evangelista.

Many commentators had predicted the bank would stand pat this month, but Japan's newly appointed top foreign exchange official said the benefits of a weaker yen were outweighed by the demerits.

"While the recent depreciation of the yen has both advantages and disadvantages, the demerits are becoming more noticeable," Atsushi Mimura told Bloomberg in an interview Monday, pointing to higher energy and food prices as well as the effect on importers.

The yen's advance comes just weeks after the unit hit a nearly four-decade low close to 162 at the start of July. Higher rates push up government yields, making assets more attractive to anyone looking for better returns.

Japan's finance ministry said Wednesday it spent 5.5 trillion yen to boost the yen's value by intervening in forex markets between June 27 and July 29.

The surge in the currency's value in mid-June, shortly after US inflation data came in lower than anticipated, had triggered speculation among analysts of an intervention by Japanese authorities.

The Nikkei 225 bounced back from morning losses on Wednesday after the announcement and finished more than one percent higher.

The rest of Asia also advanced, with optimism running high that while the Fed will not cut rates later in the day, it will tee up a reduction at its next gathering.

There is also talk of at least one more before the end of the year.

Hong Kong and Shanghai advanced, helped by hopes for more policy support following another weak batch of data on Chinese factory activity.

Dealers brushed off news that Microsoft saw an increase in quarterly profit but its key cloud computing unit fell short.

That came after results last week from Tesla and Alphabet missed forecasts, fuelling concerns about the tech titans that have led a rally in markets this year.

More reports are due this week from tech giants Apple, Amazon and Facebook-parent Meta.

- Key figures around 1115 GMT -

Dollar/yen: DOWN at 150.53 yen from 153.09 yen on Tuesday

West Texas Intermediate: UP 2.8 percent at $76.82 per barrel

Brent North Sea Crude: UP 2.5 percent at $80.63 per barrel

London - FTSE 100: UP 1.5 percent at 8,394.34 points

Paris - CAC 40: UP 1.5 percent at 7,583.05

Frankfurt - DAX: UP 0.6 percent at 18,513.74

Euro STOXX 50: UP 1.1 percent at 4,894.07

Tokyo - Nikkei 225: UP 1.5 percent at 39,101.82 (close)

Hong Kong - Hang Seng Index: UP 2.0 percent at 17,344.60 (close)

Shanghai - Composite: UP 2.1 percent at 2,983.75 (close)

New York - Dow: UP 0.5 percent at 40,743.33 (close)

Pound/dollar: UP at $1.2843 from $1.2832

Euro/dollar: UP at $1.0834 from $1.0813

Euro/pound: UP at 84.35 pence from 84.24 pence

(H.Schneide--BBZ)