Asia stocks dip, STI opens higher and US dollar buoyant as Fed comes into view

An investor looks at an electronic board showing stock information at a brokerage house in Nanjing, China.
An investor looks at an electronic board showing stock information at a brokerage house in Nanjing, China. PHOTO: REUTERS

TOKYO (REUTERS) - Asian stocks edged lower early on Monday (Jun 12) following a slide by US technology shares and the US dollar rose ahead of this week's US Federal Reserve policy meeting, with markets hoping for more guidance on the central bank's interest rate path.

Singapore shares, however, opened higher with the benchmark Straits Times Index at 3,260.68 in early trade, up 0.2 per cent, or 6.49 points. Around 62.8 million shares exchanged hands.

The US Fed holds a two-day meeting ending on Wednesday at which it is widely expected to hike interest rates. The focus is on whether the Fed thinks the US economy is robust enough to withstand further rate increases through 2017.

A rate hike accompanied by a message suggesting that the Fed may raise rates more than expected in 2017 would support the dollar but be negative for equity markets.

"Political events like the UK election and Mr Comey's testimony are over and the focus this weeks shifts to monetary policy," said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo. "The equity markets and the dollar have mostly priced in the Fed signalling three rate hikes in 2017. That explains why US equities have held up. But if the Fed hints at more than three hikes, that could trigger a sell-off in equities that many are bracing for."

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.1 per cent following a mixed day Friday on Wall Street where the Nasdaq slid 1.8 per cent on tumbling technology shares but the Dow closed at yet another record high.

MSCI's Asia-Pacific index was still in reach of a two-year high scaled late last week.

Japan's Nikkei was down 0.5 per cent and South Korea's KOSPI slid 0.5 per cent. Australian markets were closed for a public holiday. Equities navigated through last week's potential landmines events relatively unscathed.

Congressional testimony by former FBI Director James Comey caused few ructions, and the fallout of Britain's surprise parliamentary election result, at which the ruling party lost the majority, was mostly contained to the pound.

Sterling was down 0.05 per cent at US$1.2734 after sliding 1.7 per cent on Friday, when it plumbed a near two-month low of US$1.2636. It was trading 1.7645 against the Singdollar.

The US dollar was steady at 110.320 yen, and was trading 1.3846 against the Singdollar.

The US currency received support as Treasury yields, which marked seven-month lows early last week at the height of investor jitters towards the UK elections and Mr Comey's testimony, continued their bounce ahead of the Fed's anticipated rate hike.

US crude and Brent were both 0.35 per cent higher at US$45.99 and US$48.32 a barrel, respectively.