SINGAPORE- Asian stocks briefly made one-week highs on Wednesday, bonds rallied and the dollar sank on new hints at US interest rate cuts, while the New Zealand dollar jumped after its central bank said another hike may be necessary if inflation proves stubborn.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5 percent in early trade before weakness in Hong Kong tech shares dragged it back to flat.
Japan’s Nikkei fell 0.2 percent . The New Zealand dollar was last up 1.1 percent at a four-month high of $0.6207, having blown past resistance.
The US dollar, meanwhile, slid to fresh multi-month lows on the euro, yen, sterling, the Australian dollar, yuan and Swiss franc. Gold hit a seven-month high above $2,051 an ounce.
Overnight Fed Governor Christopher Waller – an influential and previously hawkish voice at the US central bank – told the American Enterprise Institute that rate cuts could begin in a matter of months, provided inflation keeps falling.
Fed funds futures rallied on the remark to price more than hundred basis points of cuts in 2024 and 40 percent chance they begin as soon as March. Two-year Treasury yields fell sharply and along with the dollar fell further still in Asia.
“The market clearly moved on Governor Waller’s opening up the possibility of cuts,” said Tapas Strickland, head of market economics at National Australia Bank in Sydney. Waller’s remark echoed earlier comments made by Fed Chair Jerome Powell.
The two-year yield hit its lowest since mid-July at 4.70 percent and the benchmark 10-year yield fell 4 bps to its lowest since September at 4.30 percent .
The dollar was last down 0.5 percent at 146.68 yen its lowest since Sept. 12 and a drop of nearly 2 percent in three days. It touched a 3-1/2 month low at $1.1017 per euro
Waller said that if the decline in inflation continues, “for several more months … three months, four months, five months … we could start lowering the policy rate just because inflation is lower.”
“There is no reason to say we will keep it really high,” he said. -Reuters
