Dollar Weakens, Japanese Stocks Gain Before Fed
The dollar fell, resuming this month's downtrend, as traders debated the size of a potential Federal Reserve interest-rate cut later Wednesday. Japanese shares rose.
Bloomberg's dollar index dropped for the fifth time in six days as market-implied odds put the chance of a half-point Fed rate cut Wednesday at just over 50%. The central bank will also release its long-term dot-plot forecasts with the decision, and Chair Jerome Powell will hold a press conference.
Japan's Nikkei 225 Stock Average climbed as much as 1.3% in early trade as a slide in the yen on Tuesday boosted the outlook for the nation's exporters. Equities trimmed those gains as the yen rose in Asia. Other Asian shares were mixed with investors unwilling to place big bets before the Fed.
The crucial thing for traders is investors'reaction to the Fed decision. Will a 25 basis-point cut leave them worried the Fed is behind the curve, or will a 50 basis-point move spook markets into thinking policymakers must know the economy is in worse shape than most currently believe?
"With the Fed meeting holding the potential to significantly boost volatility, there are clearly enough reasons for would-be buyers to sit on their hands," said Chris Weston, head of research at Pepperstone Group in Melbourne. "While shorts may look to cover, the prospect of a day where we see a grind lower through trade on lighter volumes seems highly plausible."
Bloomberg's dollar gauge slipped 0.1%, extending losses over the past week to almost 1%. The yen climbed about 0.7% Wednesday after sinking more than 1% in New York. Bank of Japan Governor Kazuo Ueda and his colleagues are forecast to keep rates hold on Friday and discuss whether conditions are falling into place for another hike this year.
Chinese chip-related stocks jumped after the nation claimed a breakthrough in the development of homegrown chip-making equipment. Shanghai Zhangjiang High-Tech Park Development jumped by the daily 10% limit, while Changchun UP Optotech and Sai Micro Electronics also rallied.
Key events this week:
Eurozone CPI, Wednesday
Fed rate decision, Wednesday
UK rate decision, Thursday
US US Conf. Board leading index, initial jobless claims, US existing home sales, Thursday
Japan rate decision, Friday
Eurozone consumer confidence, Friday
Currencies
The Bloomberg Dollar Spot Index fell 0.1%
The euro rose 0.1% to $1.1128
The Japanese yen rose 0.7% to 141.42 per dollar
The offshore yuan rose 0.2% to 7.0994 per dollar
Commodities
West Texas Intermediate crude fell 0.5% to $70.85 a barrel
Spot gold rose 0.2% to $2,574.01 an ounce
Source : Bloomberg
