SINGAPORE- Gold prices hit a record high on Wednesday and the dollar was on the rise again, keeping pressure on the yen and the euro, while Asian stocks inched higher as investors were reluctant to place major bets ahead of a hotly contested US election.
Shifting expectations around how fast and deep the Federal Reserve will cut rates have also hurt risk sentiment, with traders now anticipating the US central bank to be measured in its easing.
That has taken US Treasury yields to a three-month peak and the dollar to multi-month highs against the euro, sterling and the yen, which is now back at 150 per dollar levels, prompting verbal warnings from Japanese officials.
MSCI’s broadest index of Asia-Pacific shares outside Japan was last 0.3 percent higher. Tokyo’s Nikkei fell 1 percent ahead of Japan’s election this weekend..T
China and Hong Kong stocks gained on Wednesday, buoyed by the promise of government help for the economy even though the scope and timing of stimulus measures remain uncertain.
The listless mood was set to continue in Europe, with Eurostoxx 50 futures 0.08 percent higher, German DAX futures up 0.11 percent and FTSE futures down 0.04 percent.
George Boubouras, head of research at Melbourne-based K2 Asset Management, said the strength of the economy and ongoing fiscal spending suggest the easing cycle in the US will be shallow.
“The market has priced in too much easing. This is now unwinding supporting the USD. Add the potential of a Trump election win, which will be USD supportive plus further curve steepening,” Boubouras said.
The prospect of a Donald Trump presidency has been in focus for investors, with Trump policies including tariffs and restrictions on undocumented immigration expected to increase inflation.
That in turn has supported the dollar on expectations US rates may remain relatively high for a longer-than-anticipated period.
