Expectant Nervousness Ahead of Central Bank Meetings: Market Movements in Asia and the Role of Cryptocurrencies

The Asian stock markets showed a slight upward movement on Tuesday, while the US dollar remained stable. Investors are eagerly anticipating a series of central bank meetings scheduled for this week. In particular, there is keen interest in the decisions of the US Federal Reserve, which is expected to announce an interest rate cut, while the Bank of Japan is likely to remain unchanged for the time being. Meanwhile, Bitcoin, the most well-known and largest cryptocurrency, hovered near a record high. After hitting the historic mark of $107,821 on Monday, it recently stabilized at $106,041. Since the US elections in November, the cryptocurrency has experienced a remarkable rally as market participants hope for a friendlier regulatory policy from the Trump administration. This led to a 150% increase in Bitcoin in 2024. In the stock markets, the Australian market posted a 0.75% gain, Japan's Nikkei Index increased by 0.26%, and the technology-oriented Taiwanese stocks rose by 0.5%. The broad MSCI index for Asia-Pacific stocks outside Japan recorded an increase of 0.18%. Throughout the year, the index is headed for a remarkable 10% gain - the best annual performance since 2020. In China, unexpectedly weak consumption data in November led to declining stock prices. The Hang Seng Index in Hong Kong fell by 0.4%, while mainland stocks dropped by 0.13% in early trading. According to Tony Sycamore, a market analyst at IG, there is still a significant need for further stimulation measures in China, particularly in the fragile real estate sector. However, these measures are expected only after the release of details of US tariffs on China next year. In South Korea, the Kospi fell by 0.57%, which increased this year’s losses to about 7%, earning it the title of the worst stock market in Asia this year. The country is struggling with political turmoil after President Yoon Suk Yeol was impeached and suspended on Saturday due to his brief attempt to impose martial law. Significant monetary policy decisions are on the agenda this week as the central banks of the US, Japan, Great Britain, Sweden, Norway, Indonesia, and Thailand meet. While many institutions, including the Bank of England, Norges Bank, and the Bank of Thailand, are expected to keep their policies unchanged, the Riksbank plans a rate cut. Bank Indonesia, on the other hand, is likely to raise rates to support the Rupiah, which is near a four-month low. The main focus is on the Fed and particularly the projections for the next year. The markets anticipate a 25-basis-point cut on Wednesday. After this cut, the markets see about a 37% chance of either another 25-basis-point reduction or no further adjustments until 2025, as suggested by the CME FedWatch Tool.