SINGAPORE- Asian equities climbed on Tuesday but could not break this month’s highs as mixed messages from US Federal Reserve policymakers left doubts hanging over the timing of interest rate cuts.
The risk of Japan intervening to prevent further falls in the yen put a little pressure on the dollar, however it rose against the yuan on speculation that China may tolerate a weaker currency.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.6 percent , with gains for South Korean chipmakers SK Hynix and Samsung Electronics leading the Kospi up 1.2 percent .
Japan’s rocketing Nikkei was steady, as was the yen at 151.31 per dollar.
Overnight, Chicago Fed President Austan Goolsbee said he had penciled in three rate cuts this year, while Fed Governor Lisa Cook urged caution and Atlanta Fed President Raphael Bostic re-iterated Friday remarks trimming his expectations to one cut.
The diversity of views throws a few wildcards into the policy outlook while markets wait on the next US inflation indicators due when many markets will be closed for Good Friday.
“Comments by FOMC participants suggest to us that four voters — Bostic, Bowman, Mester, and Barkin — see zero, one or two cuts this year,” said Standard Chartered strategist Steve Englander.
“We still think (chairman Jerome) Powell has eight votes for easing, but he probably does not want an 8-4 vote on the first cut of the cycle. Rather, he may hope that good inflation outcomes will allow him to swing a couple of votes into the cutting camp in the coming months.”
Interest rate futures price about three Fed rate cuts this year and about a three-in-four chance of the first cut in June.
US two-year yields which track short-term interest rate expectations, rose in New York trade overnight then fell 4.5 basis points in the Asia morning to 4.58 percent .
S&P 500 futures rose 0.1 percent and the cash index closed 0.3 percent lower overnight.
In foreign exchange, Monday’s rhetoric from Japan’s top currency diplomat, Masato Kanda, kept the yen steady as traders weigh the risk of Japan buying heavily. Kanda said the yen’s recent slide was “strange” and “speculative”.
The Bank of Japan (BOJ) lifted interest rates last week but the yen has fallen near to three-decade lows on the dollar.
