Asian Shares Trade Mixed As Traders Eye Fed

Asian shares were mixed on Wednesday as traders awaited the Federal Reserve’s policy announcement that is scheduled for 6 p.m. GMT today. The U.S. central bank decision will be followed by a news conference lead by Fed Chair Janet Yellen. A June rate hike is largely expected today though questions remain whether the Fed will implement another rate hike this year as originally expected. Soft inflation data is threatening the final rate hike as inflation; the five-year outlook for inflation is at a seven-month low of 2.18 percent, down from 2.52 percent after Donald Trump’s presidential win.

According to Financial information services firm TransUnion, the prior rate hike in December 2016 left approximately 8.6 million consumers unable to absorb their new monthly payments (which were estimated to be only $18 more per month), a problem that would likely be aggravated by the upcoming rate hike.

South Korea’s Kospi was down 0.2 percent on Wednesday and the Shanghai Composite eased 0.5 percent. MSCI’s broadest index of Asia-Pacific shares outside Japan was up marginally and Japan’s Nikkei 225 also gained a modest 0.1 percent. The wobbly Asian markets followed a strong close on Wall Street on Monday which snapped the recent downtrend and played on trader optimism about the Fed’s upcoming announcement.  

Japan’s Interest Rates

The Bank of Japan is expected to keep monetary policy unchanged on Friday after its two-day policy meeting, despite low inflation and the country’s strong economy. The BOJ is expected to continue its promise to guide short-term interest rates at minus 0.1 percent and 10-year government bond yield around zero percent under its yield curve control policy. BOJ Governor Haruhiku Kuroda has refused to comment on how the BOJ will end its loose monetary policy, claiming that inflation is too far from its 2 percent target to address the issue.  

The dollar was trading at 110.07 yen as of 6:05 a.m. GMT on Wednesday, up 0.03 percent. The greenback remained fairly stable against the euro, trading at $1.1214, a 0.01 percent gain.