Friday 30 September 2016

Asia shares rise as FED holds on interest rates

Published 28/04/2016 | 08:23

A woman looks at an electronic stock board at a securities firm in Tokyo (AP)
A woman looks at an electronic stock board at a securities firm in Tokyo (AP)

Asian stocks edged higher on Thursday as the US Federal Reserve appeared to be in no hurry to raise interest rates, while oil consolidated gains after hitting a 2016 peak.

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MSCI's broadest index of Asia-Pacific shares outside Japan added 0.4pc. Hong Kong stocks rose more than 1pc, while S&P 500 e-mini futures edged up 0.1pc, after Wall Street posted solid gains overnight.

In its statement issued after its meeting on Wednesday, the Fed left interest rates unchanged on Wednesday, but kept the door open to a hike in June while showing little sign it was in a hurry to tighten.

"The committee continues to closely monitor inflation indicators and global economic and financial developments," the Fed said following its two-day meeting.

Scotia Bank currency strategist Gao Qi said while a 25 basis point increase is likely in the coming months, the timing still remained uncertain, indicating the Fed was in no rush to lift interest rates again soon after a December rise.

Led by the New Zealand dollar, Asian currencies rallied against the greenback as investors took the Fed statement as a sign to head for relatively higher yielding currencies.

Only the Japanese yen was trading weaker against the dollar ahead of a BOJ's policy decision, which is often announced around noon in Tokyo, or 0300 GMT, will be a close call.

Policymakers may be hesitant to take further steps after unveiling their negative interest rate policy in January, though a strong yen and receding inflation expectations could prompt them to ease further.

Data issued early on Thursday showed Japan's core consumer price index fell 0.3pc from the year-ago period, compared with economists' median estimate for a 0.2pc gain.

Separate data showed industrial output rose more than expected and labour demand jumped to the highest in two decades, but renewed worries about weak private consumption are likely to temper any optimism about the economy.

"USD/JPY is likely to fall steeply if there is no change in policy," Sean Callow, senior currency strategist at Westpac in Sydney, said in a note to clients. "Most likely there will be at least some tweaks of the existing suite of policies."

The dollar edged up 0.2pc to 111.73 yen, moving back toward a three-week high of 111.90 notched on Monday.

The euro was steady at $1.1301.

US crude futures CLc1 were down 0.2pc in early Asian trading at $45.17 a barrel, after hitting their 2016 high of $45.62 following the Fed's decision. Brent LCOc1 also rose to the highest for this year at $47.45, but shed 0.3pc in Asian trade to $47.04.

Earlier in the session, the Reserve Bank of New Zealand kept its benchmark interest rate unchanged at 2.25pc, but reiterated further easing may be needed given weak inflation.

The decision propelled the New Zealand dollar up 1.6pc to $0.6905, after it rocketed as high as $0.6944.

Brazil's central bank also left interest rates unchanged late on Wednesday, leaving its benchmark Selic rate BRCBMP at 14.25pc for the sixth straight meeting in its fight against high inflation in what could be the current board's last decision ahead of that country's likely change of government.

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