Asia-Pacific currency news summary: Asia markets rise. Japan’s CPI reaches four-year low.

Summary

The news around the Iran war has been quite muted lately. Ongoing discussions between Tehran and Washington are taking place through intermediaries from Pakistan, with a focus on creating a framework for a potential agreement.

In Japan, the core CPI saw a 1.4% year-on-year increase in April, which is the lowest rate in four years and falls short of the expected 1.7%. The core inflation measure, excluding fresh food and energy, has been closely monitored by the Bank of Japan, slowing to 1.9% from 2.4% in March—marking the lowest level since July 2024.

Asian stock markets mostly rose, spurred by solid Wall Street gains and a sense of cautious optimism regarding developments in Iran.

The Nikkei Stock Average increased by over 2%. In contrast, mainland Chinese stocks lagged slightly, managing only a 0.2% rise, while Hong Kong’s stock market saw a more favorable increase of 0.8%.

Major foreign exchange pairs maintained a stable range during the trading session.

Looking forward: President Trump is set to oversee the swearing-in of Federal Reserve Chairman Kevin Warsh at 11:00 ET (15:00 GMT), followed by a speech at Rockland Community College at 15:00 ET (19:00 GMT). Note that U.S. markets will be closed on Monday for Memorial Day.

Asian markets generally closed higher on Friday, in a day that lacked significant geopolitical tension but still managed to deliver noteworthy economic data, particularly with Japan’s core inflation rate dropping to its slowest in four years. This has sparked renewed discussions about the Bank of Japan’s future policies.

On Asia Day, news flow concerning the Iran war was rather limited. It seems discussions between U.S. and Iranian officials are ongoing through Pakistani intermediaries, with a focus on establishing a foundational framework that could lead to a formal agreement. The absence of escalation helped sustain a cautious optimism that has been supporting regional risk sentiment in recent meetings.

The Nikkei Stock Average performed exceptionally well, rising over 2%, a move that was more indicative of positive sentiment than actual enthusiasm over Japan’s inflation figures. Core consumer prices increased only 1.4% year-on-year in April, which is below the expected 1.7% and the lowest rate since March 2022. The core-core index, preferred by the Bank of Japan for gauging demand-driven inflation (excluding fresh food and energy), dropped to 1.9% from 2.4% in March, marking its weakest level since July 2024. Analysts largely expect the Bank of Japan to hike interest rates in June, rather than fearing the underlying disinflation driven by government subsidies for energy and education.

Mainland Chinese stocks underperformed compared to other regional gains, with only a modest 0.2% rise, while Hong Kong stocks had a much healthier increase of 0.8%. Major currency pairs remained within narrow ranges as traders hesitated to assume new positions ahead of the U.S. Memorial Day weekend, which will see New York markets closed on Monday.

The weekend kicks off with President Trump presiding over the swearing-in ceremony of Federal Reserve Chairman Kevin Warsh at the White House at 11:00 ET, followed by a speech scheduled for 3:00 pm ET at Rockland Community College.