By Ray Wee
SINGAPORE (Reuters) – Asian shares rose to a one-month high on Tuesday, tracking a rise on Wall Street on hopes the U.S. Federal Reserve may signal further interest rate cuts this week.
With relatively few data releases from major economies this week, attention is focused on the minutes of the Fed's July meeting on Wednesday and Chairman Powell's speech at Jackson Hole on Friday for clues about the outlook for U.S. interest rates.
MSCI's broadest index of Asia-Pacific shares ex-Japan hit a one-month high before giving up gains to trade up 0.4%.
Japan's Nikkei stock average rose 1.7 percent as tech stocks surged, undeterred by the recent rise in the yen. (.T)
Fed speakers in recent days have hinted at the possibility of monetary easing in September.
That has helped gold prices hover above $2,500, near its all-time high, while the dollar fell to $101.76 in early trading on Tuesday, its lowest level against any major currency in seven months.
Thierry Wisman, global currency and rates strategist at Macquarie, said markets were bracing for dovish comments from Powell and other Fed chairs at Jackson Hole.
“An acknowledgement of the deflationary path of the US economy would confirm a rate cut in September. Markets are likely to be driven by the extent to which Chairman Powell allows for a 50bp rate cut at one of the next three FOMC meetings.”
The dollar languished at a seven-month low against the euro before hitting a high of $1.108775 on Tuesday on expectations of dovish policy outcomes from the Fed this week.
The pound was trading near a one-month high, last trading at $1.2985. Against the yen, the US dollar was down 0.23% to $146.26.
News that Israeli Prime Minister Benjamin Netanyahu had accepted a “bridge offer” put forward by the United States to address differences blocking a ceasefire agreement in Gaza also boosted risk appetite.
U.S. stock futures were little changed in early Asian trading, with S&P 500 futures down 0.02% while Nasdaq futures rose 0.04%. Euro Stoxx 50 futures were flat while FTSE futures were down 0.36%.
In Asia, China's benchmark lending rate was left unchanged as expected, drawing muted market reaction.
Shares in Japan's Seven & i fell more than 7 percent after rising 23 percent in the previous trading day on reports that Canada's Alimentacion Couche-Tard had made a takeover bid for 7-Eleven's parent company.
Later this week, traders will also be keeping an eye on Bank of Japan (BOJ) Governor Kazuo Ueda, who is due to appear before the Diet on Friday to discuss the interest rate hike the central bank decided to make last month.
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The Bank of Japan's hawkish stance brought great volatility to the market as investors actively withdrew yen-denominated carry trades, shaking up stock prices worldwide.
Market turmoil calmed earlier this month after Bank of Japan Deputy Governor Shinichi Uchida downplayed the likelihood of further interest rate hikes in the near term.
“As markets calm, Ueda may change tack and talk again about interest rate normalization,” said Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia.
Oil prices edged lower as concerns over Middle East supply disruptions eased, with Brent crude down 0.15% to $77.54 a barrel. U.S. crude fell 0.5% to $74 a barrel. (O/R)
(Reporting by Ray Wee; Editing by Edwina Gibbs)
