Asia stocks, dollar steady as investors await Fed clues

Published Jul 26, 2017

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Tokyo - Asian stocks steadied on

Wednesday and the dollar held firm as investors awaited the

Federal Reserve's policy decision later in the day for more

clues on its tightening plans.

The Fed concludes a two-day meeting later on Wednesday, and

is widely expected to keep interest rates unchanged.

With a rate hike not in the picture this time, the focus

will be on the Fed's statement, with markets looking for signs

of when the central bank will begin paring its massive bond

holdings and next raise rates. A statement is expected at 1800

GMT.

"The stock markets are generally of a view that the Fed is

not in too much of a hurry to normalise monetary policy. So

equities would be able to take this Fed meeting in stride if the

Fed's statement is in line with such views," said Masahiro

Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

Federal funds futures implied traders saw the chance of a

Fed rate increase in September at about 8 percent and a December

hike possibility at 48 percent.

A more assertive policy message by the Fed, on the other

hand, was expected to lift U.S. yields and boost the dollar.

MSCI's broadest index of Asia-Pacific shares outside Japan

was little changed, but drew mild support after

the S&P 500 climbed to an all-time high overnight on

well-received results from McDonald's and Caterpillar

in addition to bank share gains.

Australian stocks gained 1 percent with a

smaller-than-expected rise in local inflation supporting views

that interest rates will remain at record lows for some time to

come. The Australian dollar slipped 0.3 percent to $0.7918

.

Japan's Nikkei added 0.5 percent after the dollar

rallied against the yen overnight to pull away from

seven-week lows.

Shanghai lost 0.2 percent while South Korea's KOSPI

slipped 0.3 percent.

The dollar regained some ground against major currencies in

the previous session after U.S. Treasury yields jumped the most

in almost five months in response to Wall Street's rise and on

reduced demand for safe-haven bonds.

But the greenback remained hobbled by uncertainty about the

progress of healthcare reforms and the prospect of further

delays for President Donald's Trump's ambitious stimulus and tax

reform polices.

U.S. Senate Republicans narrowly agreed on Tuesday to open

debate on a bill to end Democratic President Barack Obama's

signature healthcare law, but it still faces significant

hurdles.

The dollar has also been kept in check by political

uncertainty as lawmakers investigate possible meddling by Russia

in the 2016 presidential election and whether there was any

collusion by Trump's campaign.

The euro was effectively flat at $1.1651, pulling

back from a two-year high of $1.1712 hit on Tuesday on a

stronger-than-expected German Ifo business survey.

Expectations that the European Central Bank would begin

phasing out its easy monetary policy sooner rather than later

have supported the common currency this month.

The dollar index against a basket of major currencies was

little changed at 94.061, after managing to put some

distance between a 13-month low of 93.638 plumbed on Tuesday.

The dollar was steady at 111.915 yen after surging

about 0.7 percent overnight.

"The dollar continues to lack clear direction against the

yen. Uncertainty towards US politics is capping the pair. But

'risk on' is also taking place in equities thanks to good

corporate results, so dollar/yen is not headed for a big slide

either," said Daisaku Ueno, chief currency strategist at

Mitsubishi UFJ Morgan Stanley Securities.

In commodities, crude oil extended its surge after jumping

overnight on data showing a sharp fall in U.S. crude stocks last

week.

US crude rose 1 percent to $48.37 a barrel and

Brent added 0.8 percent to $50.61 a barrel.

Gold struggled as improved investor risk appetite curbed the

precious metal's appeal. Spot gold was a shade lower at

$1,248.26 an ounce following its ascent to a one-month peak of

$1,258.79 on Monday.

Reuters

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