WELLINGTON/SINGAPORE (BLOOMBERG) - Asian equities joined a global rebound as the Federal Reserve's decision approached, while the dollar weakened against most major currencies and oil resumed declines.
The MSCI Asia Pacific Index climbed 2.1 per cent as of 12:21 pm Tokyo time, with Japan's Topix index up 2.2 per cent from an eight-week low.
Singapore's Straits Times Index was up 0.82 per cent at 2,838.62 as at 11:53 am.
Australia's S&P/ASX 200 Index jumped 2.1 per cent, rising for the first time since Dec 7 amid gains in energy and mining shares. The Kospi index in Seoul rallied 1.9 per cent, while Hong Kong's Hang Seng Index advanced the most in a month after a nine-day, 5.4 per cent drop.
Futures on the Standard & Poor's 500 Index added 0.2 per cent after the measure gained 1.1 per cent on Tuesday.
The Fed rate announcement is due at 3am on Thursday, Singapore time.
"Markets had time to prepare for this day, with investors winding back risk ahead of the event," said Tim Schroeders, a portfolio manager who helps oversee about US$1 billion in equities at Pengana Capital Ltd. in Melbourne. "What happens after the Fed rate hike is difficult to tell especially since we're coming into a quiet period around Christmas and New Year. Volatility will probably continue."
Investors are heading into Fed decision day on a more positive note, after oil came back from a six-year low and the rout in high-risk debt took a breather. Traders and economists expect the US central bank will boost key rates on Wednesday, while indicating that any subsequent hikes will be gradual as long as economic growth remains steady.
Investors are about to find out how much equities are worth in the absence of Fed support. Cheap money has fueled a bull market in US shares, helping stocks recover from the global financial crisis and restoring US$15 trillion to market values since 2009.
The Bloomberg Dollar Spot Index, a gauge of the US currency against 10 major peers, fell 0.1 pe rcent on Wednesday after a four-day advance. It's climbed more than 8 per cent this year as anticipation of tighter Fed policy fueled gains.
"The FOMC meeting could cause some fireworks," Jason Wong, a currency strategist in Wellington at Bank of New Zealand Ltd., said in an e-mail to clients, referring to the Federal Open Market Committee. "This has been one of the most anticipated Fed meetings in modern history, but some trading volatility could still be expected as market participants interpret and misinterpret the FOMC language."
The euro gained 0.1 per cent to US$1.0944 following Tuesday's 0.6 per cent drop, while the yen traded at 121.73 per dollar after falling 0.5 per cent last session. The won strengthened 0.3 per cent as traders judged its recent declines to be excessive.
The yuan recovered from initial losses in Hong Kong's offshore market on suspected intervention by Chinese policy makers. The currency was 0.2 per cent higher at 6.5274 per dollar, after earlier sliding to 6.5438.
A major Chinese bank placed a "sizable bid" for yuan at around 6.53, triggering the rebound in the offshore exchange rate, said Ryan Lam, the Hong Kong-based head of research at Shanghai Commercial Bank Ltd. "Trading will be thinner around Christmas which means the PBOC can achieve its goal even with small-scale interventions."
West Texas Intermediate fell amid speculation Iran is moving closer to boosting crude exports after United Nations monitors ended a probe of the Islamic Republic's research into atomic-weapon technologies. Crude slipped 1 per cent to US$36.96 a barrel after rallying almost 5 per cent the past two sessions.