Tokoyo - Asian shares gained on Wednesday
after Wall Street managed to weather a fresh twist in the
controversy over US President Donald Trump's alleged
connection with Russia, while investors looked ahead to Federal
Reserve Chair Janet Yellen's comments.
MSCI's broadest index of Asia-Pacific shares outside Japan
ticked up 0.4 percent. Japan's yen-sensitive
Nikkei slid 0.3 percent on the yen's gains but MSCI's
dollar-denominated Japan index gained 0.4
percent.
US stocks took a brief tumble after emails disclosed
Trump's eldest son welcomed help from a Russian lawyer for his
father's 2016 election campaign against Hillary
Clinton.
But by the closing bell, Wall Street shares had clawed back
their losses.
"The e-mails look pretty bad but then again they don't look
like decisive evidence (for illegal behaviour) either. I doubt
this alone would lead to a risk-off market," said Hiroko Iwaki,
senior fixed income strategist at Mizuho Securities.
US shares were helped in part as the Senate announced a
two-week delay to its August recess to allow more time to tackle
a measure that would repeal key parts of Obamacare, as well as
pursue other legislative priorities.
Still, it remained unclear whether US Senate Republicans
have the votes to pass the measure or even what form it would
finally take.
On the other hand, the dollar failed to recover after the
damage suffered from the new twist in the Trump campaign's
alleged links with Russia.
The euro vaulted to a 14-month high of $1.1484 in
Asian trade.
The dollar also lost steam against the yen, which had been
under renewed pressure following Friday's bond-buying by the
Bank of Japan which highlighted divergent monetary polices
between the two countries.
The US currency dropped 0.3 percent to 113.60 yen,
slipping from a four-month high of 114.495 yen touched on
Tuesday.
The dollar index against a basket of six major currencies
was hovering at 95.64, within sight of its
nine-month low of 95.47 plumbed at the end of June.
US Treasuries yields stayed below their recent peaks, with
the 10-year yield at 2.355 percent, compared with
2.398 percent marked on Friday, its loftiest level in almost two
months.
Ahead of Fed Chair Yellen's testimony to Congress on the
state of the US economy from 1400 GMT, two of her colleagues
cited low wage growth and muted inflation as reasons for caution
on further interest rate increases.
Fed Governor Lael Brainard embraced the plan to reduce the
balance sheet "soon," but suggested her support for any future
rate increases will depend in part on how inflation shapes up.
Minneapolis Federal Reserve Bank President Neel Kashkari
said he finds it hard to believe that the US economy is in
danger of overheating when wage growth is so low.
Traders trimmed expectations of a rate hike by the end of
the year, with dollar interest rate futures pricing in
about a 55 percent chance compared to about 60 percent earlier,
while most investors expect the Fed to decide to start shrinking
its balance sheet in September.
"Yellen has indicated after the June policy meeting, in the
clearest way as possible by her standards, that she plans to
start balance sheet reduction and there will be one more rate
hike this year. Since then, there's been no big changes in the
economy," said Tomoaki Shishido, senior market economist at
Nomura Securities.
"I would think the US CPI data on Friday could be more
important. If the Fed's assessment that the softness in CPI
between February and May is transitory, the Fed will go ahead
with its plan. If that's not the case, some Fed policymakers
will want to revise that plan," he added.
Reaction was largely muted to a story by Politico that
Trump is increasingly unlikely to nominate Yellen next year for
a second term, and National Economic Council Director Gary Cohn
is the leading candidate to succeed her.
Oil prices extended gains from the previous day as the US government cut its crude production outlook for next year and as
fuel inventories plunged.
US crude futures rose 1.6 percent to $45.75 per
barrel, extending their recovery from Monday's near two-week low
of $43.65. Brent futures gained 1.4 percent to $48.16
per barrel.
Both contracts have risen above their 50 percent retracement
of their fall between mid-last week and Monday.