SINGAPORE- Asia’s stockmarkets rose on Wednesday and the dollar beat a retreat as a dovish shift in tone from Federal Reserve officials had traders paring US interest rate expectations, though with a wary eye on US inflation data due on Thursday.
The S&P 500 gained overnight and MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.3 percent to a two-week high in morning trade. Japan’s Nikkei rose 0.5 percent .
“I actually don’t think we need to increase rates anymore,” Atlanta Fed President Raphael Bostic told the American Bankers Association, to applause, in Nashville on Tuesday.
The remark follows several Fed officials noting that recent rises in longer-term yields may help do the work of tightening financial conditions and crimping inflation, leaving the central bank with less to do in terms of short-term rate levels.
Wagers on whether the Fed might hike again this year have pulled back a bit this week and Treasury yields have come sharply down from 16-year highs, yanking the dollar with them.
The 10-year yield fell 12.7 basis points on Tuesday and was steady in Asia on Wednesday at 4.64 percent , after touching 4.884 percent in the wake of strong US jobs data on Friday.
On Wednesday the Australian and New Zealand dollars hit their highest levels on the dollar since the end of September, while sterling hit a three-week peak. The euro held at $1.0607, near Tuesday’s two-week high.
Moves were small, however, while traders waited on the US CPI figures.
“Signs underlying US inflation is moderating could reinforce the more watchful tone from US Fed members about future policy, exerting more pressure on the dollar,” said Peter Dragicevich, strategist at cross-border payments firm Corpay.
A Bloomberg News report on China preparing stimulus to help its economy also supported the mood, though nerves remained as giant developer Country Garden warned it wasn’t going to be able to meet its offshore payment obligations on time.
