Asia stocks mixed ahead of Fed decision.
Asian shares were mixed on Wednesday as investors stayed cautious ahead of the U.S. Federal Reserve’s policy decision later in the day, while Japanese stocks hovered near record highs after trade data showed the country’s deficit shrank less than expected.
Regional markets also tracked the subdued close on Wall Street overnight. Benchmark indices closed marginally lower on Tuesday, while futures tied to them traded largely unchanged in early Asia hours on Wednesday.
Fed decision looms large; policy outlook in focus
The Fed is widely expected to deliver a 25-basis-point cut on Wednesday, its first this year, bringing the federal funds rate to 4.00%-4.25%.
Markets have largely priced in the move, but attention is centred on the central bank’s updated economic projections and Chair Jerome Powell’s remarks for clues on the pace and extent of further easing.
Fed funds futures imply as much as 65-70 basis points of cuts by year-end, though policymakers could strike a more cautious tone if inflation remains sticky.
Oil retreats.
Oil prices eased slightly on Wednesday, after rising more than 1% in the previous session, though ongoing geopolitical jitters provided a floor under prices while traders also awaited an expected interest rate cut from the U.S. Federal Reserve.
Brent crude futures dipped 14 cents, or 0.2%, to $68.33 a barrel by 0405 GMT, while U.S. West Texas Intermediate crude futures fell 13 cents, or 0.2%, to $64.39 a barrel.
The benchmarks settled more than 1% higher in the last trading session due to concerns that Russian supplies may be disrupted.
Reuters reported on Tuesday that three industry sources said Russia’s oil pipeline monopoly Transneft has warned producers they may have to cut output following Ukraine’s drone attacks on critical export ports and refineries.
“The market has a laser focus on the geopolitical volatility and potential Russian supply disruptions. Market jitters are still keeping prices elevated,” said Emril Jamil, a senior oil analyst at the London Stock Exchange Group.
Asia FX muted, dollar steady.
Most Asian currencies moved little on Wednesday, while the dollar steadied from recent declines as markets awaited a widely expected interest rate cut by the Federal Reserve later in the day.
Most regional currencies were sitting on strong gains against the dollar in recent sessions, as increasing confidence in a U.S. rate cut stymied the greenback. The dollar slid to a two-month low on Tuesday.
But some weak economic readings weighed. The Japanese yen retreated on mixed trade data, while the Singapore dollar was pressured by a dismal export reading.
Anticipation of a Bank of Japan meeting this week also kept markets on edge.
Japanese yen pressured by mixed trade data; BOJ in sight
The Japanese yen’s USD/JPY pair rose 0.1% on Wednesday after falling sharply in the prior session.
Data showed the country’s trade balance shrank less than feared in August, with exports also falling less than expected as a recent trade deal with the U.S. offered some clarity.
But exports still remained in contraction, while substantially softer-than-expected imports signaled that local demand remained weak.
The print comes just days before a BOJ meeting, where the central bank is widely expected to leave interest rates unchanged amid heightened political uncertainty in the country.
Still, the BOJ may offer hawkish signals amid sticky Japanese inflation and relatively steady private spending. Japanese consumer inflation data for August is due before the BOJ’s rate decision on Friday.
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