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Asian shares firm, dollar holds ground before Fed

Asian shares firm, dollar holds ground before Fed
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First Published: Tue, Mar 16 2010. 09 33 AM IST
Updated: Tue, Mar 16 2010. 09 33 AM IST
Tokyo: Asian shares rose modestly on Tuesday, with technology stocks nosing ahead, while the dollar held its ground ahead of a Federal Reserve policy meeting expected to reiterate a pledge to keep rates low for a long time.
The MSCI index of Asian shares excluding Japan rose 0.3% after retreating almost 1% on Monday and backing off a seven-week high last week.
Sentiment was cautious as investors keep an eye on China for signs of potential policy tightening and wait to see if the Fed will repeat its regular pledge to keep rates low for an extended period.
The outcome of the Fed meeting is due to be announced at 9:45pm on Tuesday. No rate change is expected.
“We believe that the ‘low-for-long´ wording will be left unchanged,” JP Morgan said in a morning report. “Such an outcome could suppress the market expectation for the Fed’s early hikes and exert pressure on the US dollar.”
Tokyo’s benchmark Nikkei index rose 0.2% to inch back towards a seven-week intraday high set on Monday, although gains were limited by profit-taking in shares such as Honda Motor. The market is also waiting to see if the Bank of Japan eases policy on Wednesday, although analysts say the market has probably priced in such a move.
Seoul shares rose 0.1%. Hynix Semiconductor traded up 1.3% after news that leading shareholders of the world’s No.2 chipmaker raised more than $800 million in a block sale of a 6.7% stake.
Australian stocks edged up 0.2%, as miners proved resilient to concerns that China might tighten monetary policy further to prevent overheating following higher than forecast inflation figures last week.
Top miners such as BHP Billiton and Rio Tinto rose, underpinned by hopes that iron ore contract price negotiations would see prices rise in line with spot market prices and that demand outside of China would remain strong.
Hong Kong shares firmed 0.3% while Shanghai stocks gained 0.3% after ending at a five-week low on Monday on expectations of policy tightening.
Chinese oil company PetroChina advanced 0.3%, with financial stocks also leading.
The Dow Jones industrial average closed up 0.16% on Monday, the Standard & Poor’s 500 Index rose just 0.05% and the Nasdaq Composite Index slipped 0.23%.
Snow storms restrained industrial production in the world’s largest economy in February but analysts said the data did not alter the view that the factory-led recovery remained on track.
On the Fed outcome, markets will watch how many officials dissent on the statement language after data showed consumers buying more and firms close to hiring again, and after one official dissented at the last meeting, saying conditions had improved sufficiently to warrant dropping the “extended period” phase.
The dollar index was steady at 80.17 after dipping to its lowest since mid-February on Friday, and the euro was steady holding just below $1.37.
The yen was the best performer, gaining on the euro, dollar and higher yielders, such as the Australian dollar, as investors locked in profits on positions built up against the Japanese currency ahead of possible easing steps by its central bank on Wednesday.
US crude futures held steady below $80 a barrel after falling 1.8% to the lowest close in two weeks on Monday as the dollar remained strong and ahead of US data expected to show another build in crude inventories.
Gold inched up, underpinned by concerns over Europe’s debt problems, but gains were capped with investors wary ahead of the Fed and cautious about tightening in China. Spot gold rose 0.1% to $1,109.35 an ounce.
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First Published: Tue, Mar 16 2010. 09 33 AM IST
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