Asia Markets Drop As The Dollar Holds Steady And Fed Announcements Pending

Trader's in Tokyo

The weak yen enabled Japan’s Nikkei to gain a boost of 0.8 per cent which was its highest close in two weeks.

The dollar remained steady on Monday with many Asian market players making quick earnings as investors prudently wait for the release of U.S economic data and speeches to be given by Federal Reserve officials, news that is likely to initiate an increase of interest rates to a more than an anticipated level.

U.S. stock futures went up 0.3 percent, while remaining flat for the quarter.

Last week, the dollar received help from gross domestic product data which was much stronger than foreseen, and opinions shared  by Fed officials signaling that policymakers are estimating that they may be increasing interest rates as much in advance as next month.

The dollar index achieved a high standing of 96.339 whilst up against six major currencies, its highest over a period of two weeks. Dollar’s last trading position was up 0.1 per cent at 96.273.

Jeong My-young, Samsung Futures’ research head in Seoul, said:

“Fed officials generally looked to share views that they need to maintain a rate hike path given a U.S. recovery.”

The dollar went up 0.4 percent to 113.51 yen, maintaining its gradual improvement from a 6 and half month low of 110.67 that was seen in mid-March following the Federal Reserve’s meeting which suggested to the markets that the U.S interest rates were not likely to rise any time soon.

The weak yen enabled Japan’s Nikkei to gain a boost of 0.8 per cent which was its highest close in two weeks.

Japan won within the region since share markets in Australia, New Zealand and Hong Kong, were closed for the holidays, the MSCI’s broadest index of Asia-Pacific stock external to Japan dropped 0.1 per cent.

With very little change in shares for Korea’s close and Taiwan closed down 0.2 per cent after surrendering earlier gains.

Chinese stocks seemed to fall as the Shanghai Composite index fell 0.3 per cent and the CSI dropped by 0.4 per cent.

Indonesia, Singapore, Malaysia and the Philippines also recorded losses, while trading between 0.3 per cent and 1.2 per cent lower.

U.S. GDP rose up at a 1.4 per cent annual rate in the Oct to Dec period, in advance of the earlier report of 1.0 per cent, guided by moderately active consumer spending, the third GDP estimate reported on Friday.

U.S. PCE inflation data due this afternoon is likely to meet the predictions of an early rate move if it indicates increased pressure of inflation.

Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management said:

“The PCE inflation has been rising of late. The Fed has said the prices will be the key in determining policy so the data should attract a lot of attention.”

The annual significance PCE inflation soared 1.7 per cent in January, racing since July 2014.

The data will be announced in a speech by Federal Reserve Chair Janet Yellen and other Fed policymakers on Tuesday.

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