Asia stocks inch up, US dollar steadies as investors await Fed clues

Pedestrians walk in front of a stock quotation board flashing the Nikkei 225 key index of the Tokyo Stock Exchange in Tokyo, Japan, on July 20, 2017.
Pedestrians walk in front of a stock quotation board flashing the Nikkei 225 key index of the Tokyo Stock Exchange in Tokyo, Japan, on July 20, 2017.PHOTO: AFP

TOKYO (REUTERS) - Asian stocks edged up early on Wednesday (July 26) after Wall Street indexes notched record highs, while the US dollar was steady as investors awaited the Federal Reserve's policy decision later in the day for more clues on its tightening plans.

The Fed concludes a two-day meeting later on Wednesday and is widely expected to keep interest rates unchanged.

With a rate hike not in the picture this time, the focus will be on the Fed's statement, with markets looking for signs of when the central bank will begin paring its massive bond holdings and next raise rates. A statement is expected at 1800 GMT (2pm, Thursday, Singapore time).

"The stock markets are generally of a view that the Fed is not in too much of a hurry to normalise monetary policy. So equities would be able to take this Fed meeting in stride if the Fed's statement is in line with such views," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

A more assertive policy message by the Fed, on the other hand, was expected to lift US yields and boost the dollar.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.1 per cent, drawing support after the S&P 500 climbed to an all-time high overnight on well-received results from McDonald's and Caterpillar in addition to bank share gains.

Caterpillar's results smashed expectations and the company raised its full-year forecast for the second time, underscoring strength across its businesses and a steady recovery in demand from China.

South Korea's KOSPI stood little changed and Australian stocks rose 0.9 per cent as investors awaited inflation data. Price pressures are expected to remain mild, which would add to views that rates will remain at record lows for some time to come.

Japan's Nikkei added 0.8 per cent after the dollar extended an overnight rally against the yen to pull away from seven-week lows.

The US currency was last traded at 111.980 yen for a gain of 0.1 per cent.

The greenback was lifted as investors gained some hope that United States President Donald Trump could push through his expansionary fiscal agenda, after the Senate passed a motion to proceed on a repeal of Obamacare, which Mr Trump and Republicans have vowed to undo.

The dollar also received support from a rise in US Treasury yields. Long-dated Treasury yields jumped by the most in almost five months on Tuesday as Wall Street hit new highs and on reduced demand for safe-haven bonds.

The euro was 0.1 per cent lower at US$1.1638, pulling back from a two-year high of US$1.1712 hit on Tuesday on a stronger-than-expected German Ifo business survey.

Expectations that the European Central Bank would begin phasing out its easy monetary policy sooner rather than later have supported the common currency this month.

The dollar index against a basket of major currencies was 0.1 per cent higher at 94.144, managing to put some distance between a 13-month low of 93.638 plumbed on Tuesday.

US political uncertainty has recently hurt the dollar, with the Trump administration dogged by investigations into alleged Russian meddling in the US election.

In commodities, crude oil extended its surge after jumping overnight on data showing a sharp fall in US crude stocks last week.

US crude rose 1 per cent to US$48.36 a barrel and Brent added 0.7 per cent to US$50.56 a barrel.

Gold struggled as improved investor risk appetite in the broader markets curbed the precious metal's appeal. Spot gold was 0.1 per cent lower at US$1,247.25 an ounce following its ascent to a one-month peak of US$1,258.79 on Monday.