Asian shares are on track for their biggest single-day rise in nearly two weeks while the greenback retreated after minutes of the U.S. Federal Reserve’s latest meeting showed that the chances of a September rate hike are looking pretty slim.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.7 percent, its biggest rise since Aug. 8, as investors took the Fed’s hesitancy as a reason to increase their positions after a 14 percent rise over the last two months. Tech and telecom firms shone.
“Right now, observers think a September policy rate hike is off the table,” Richard Clarida, global strategic advisor at bond giant PIMCO, wrote in a blog.
Hong Kong shares .HSI were the top gainer in Asia with a 1 percent rise, while a stronger yen, thanks to the Fed’s cautious outlook, pulled Japan’s Nikkei .N225 back 0.9 percent.
The July meeting’s minutes published on Wednesday showed that Fed policymakers were generally upbeat about the U.S. economic outlook and labor market. But they also said they wanted to “leave their policy options open” as any slowdown in hiring would argue against near-term monetary tightening.
Market participants interpreted the minutes as moderately positive for risk-taking, with the Fed remaining divided on the timing of the next hike. Futures contracts dipped slightly, signaling a receding of bets on a U.S. rate increase.
“There is clearly strong disagreement within the Fed with regards to the timing of further rate hikes,” wrote Angus Nicholson, market analyst at IG in Melbourne.
Bond markets greeted the rate Fed minutes with cautious optimism with the iShares iBoxx $ High Yield Corporate Bond ETF (HYG.P) poised to set a fresh one-year high. The yield on 10-year Australian government debt AU10YT=RR edged lower to 1.95 percent, about 100 basis points down from end-2015.
Yields on Japanese debt sunk deeper into negative territory after steady investor demand was seen at an auction of five-year government bonds. In currency markets, the dollar was down 0.2 percent at 100
03 yen JPY=, near a post-Brexit low of 99.55 hit on Tuesday.
The euro edged up 0.2 percent to $1.13060 EUR= with the common currency on track to rise more than 1 percent this week.
The dollar index was flat, having lost about 0.7 percent so far this week, during which it touched a 7-week low of 94.426 on Tuesday.
The greenback felt the sting of lower U.S. Treasury yields, which fell overnight after the release of the Fed minutes. [US/]
The weaker dollar was an additional help to commodities like crude oil though oil prices dipped in early trading on the prospect of record Saudi output.
International Brent crude oil futures LCOc1 were at $49.69 per barrel at 0050 GMT, down 0.3 percent from their last close.
Copper, which had slid on the dollar’s rise earlier in the week, trimmed some of its losses as the U.S. currency flagged.
Benchmark copper on the London Metal Exchange CMCU3 extended gains to be up 0.7 percent at $4,806 a ton after losing 0.8 percent on Wednesday.