SINGAPORE- Asian stocks hovered near two-year highs on Wednesday on growing bets of imminent US rate cuts, while the New Zealand dollar slid after its central bank signaled greater confidence that inflation was coming to heel.
The Reserve Bank of New Zealand (RBNZ) held its cash rate steady at 5.5 percent on Wednesday as expected, but noted that inflation was expected to return to its target range of 1 percent to 3 percent in the second half of the year.
The kiwi fell more than 0.7 percent in the aftermath of the decision and was last at 0.54 percent lower at $0.6092, as traders sharply ramped up bets of RBNZ rate cuts later this year.
“Them kind of saying the CPI is going to drop back into target in the second half of this year… that CPI expectations could normalize more rapidly, I think that contributed,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
“Compared to the more hawkish statement, the tone they had in the May meeting, that stood out.”
Swaps now imply more than 30 basis points worth of easing in October, as compared to 16 bps prior to the outcome.
The Aussie, meanwhile, rallied 0.6 percent to touch an over one-year high against the New Zealand dollar with the former underpinned by wagers that the next move in Australian rates might be up given inflation is proving stubborn.
MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.16 percent , but remained close to the more than two-year high hit at the start of the week.
Japan’s Nikkei rose 0.5 percent , while Hong Kong’s Hang Seng Index edged up 0.1 percent.
S&P 500 futures gained 0.05 percent , while Nasdaq futures firmed 0.14 percent .
EUROSTOXX 50 futures tacked on 0.2 percent.
Stocks have rallied globally on the back of growing expectations of a Fed easing cycle likely to commence in September, with Powell saying on Tuesday that the US is “no longer an overheated economy”.
However, he provided little clues on how soon those rate cuts could come.
