Sydney, Nov. 2 (BNA): Asian stocks fluctuated in cautious trading while the dollar eased slightly as investors braced for the US Federal Reserve policy results later in the world today, with many looking for any signs of a slowdown in future interest rate hikes.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.2% in early trade, as declines in Chinese and Hong Kong stocks offset gains in South Korea and Australia. Reuters reported that Japan’s Nikkei lost 0.1%.
The world’s largest central bank is due to release its policy statement at 2 PM ET (1800 GMT); With investors closely scrutinizing the statement and comments from Fed Chair Jerome Powell for any indication that policy makers are considering mitigating higher interest rates.
Markets are widely expecting the Fed to raise the benchmark interest rate by 75 basis points to a range of 3.75% to 4.00%, the fourth increase in a row.
However, traders are divided on the scale of the December rally, with a 44.5% probability of futures prices rising 50 basis points, according to the CME Federal Reserve instrument.
said Kevin Cummins, chief US economist at NatWest Markets.
“Given that the inflation data has not yet shown any signs of moderation, we are leaning a bit more toward officials who shy away from suggesting they are downplaying the rises so far.”
Cummins expects the Fed to step down from a 50 basis point rate hike in December.
An overnight survey showed that job opportunities in the United States rose unexpectedly in September, indicating that demand for labor remains strong. That led to a reversal in Treasury yields and raised market bets on interest rates to more than 5% next year.
US stocks closed lower, with the Dow Jones Industrial Average down 0.24%, the S&P 500 Index down 0.41% and the Nasdaq Composite down 0.89%.
In the currency market, the dollar slipped 0.6% against the Japanese yen to 147.32 yen amid thin liquidity, moving away from a recent high of 148.84 yen just two sessions ago. It has remained largely stable against other currencies.
The safe-haven US currency gave up some quick gains this year in October on speculation that the Federal Reserve may signal a slowdown in its violent tightening campaign at its November policy meeting.
The dollar’s decline in foreign exchange markets is temporary, according to a Reuters poll of currency strategists, who said that the dollar still had enough strength to regain or surpass its recent gains and resume its continued rally.
“From the Fed’s point of view, putting the US into a recession is still less sinister than not addressing entrenched price pressures,” said Chris Weston, head of research at Pepperstone.
“My view is that the risks are off the hawkish reaction – the US dollar is higher, but I will recognize that price moves indicate that the market is well positioned towards this outcome.”
US Treasury yields were largely flat after reversing a lot of losses overnight on the back of unexpected strength in jobs data.
The yield on the benchmark 10-year note fell 2 basis points to 4.0336% while the yield on the two-year note was changed to 4.5364%.
In commodities, oil rose after industry data showed a surprise drop in US crude inventories, indicating continued demand.
US crude oil futures rose 0.5% to $88.93 a barrel, while Brent crude futures rose 0.4% to $94.98.
Gold was slightly higher, with the spot trading at $1,649.50 an ounce.
SM