Japan : Asia stocks edge higher, dollar down after Fed meeting

TOKYO : Asian stocks edged up on Thursday after the Federal Reserve provided an positive assessment of the world’s largest economy and lifted risk sentiment.

The dollar fell, however, as some in the currency market had hoped the Fed would give a clearer indication that it could raise rates within the year.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.2 percent after briefly climbing to its highest level since August 2015.

Australian shares rose 0.4 percent and Shanghai .SSEC gained 0.3 percent, trimming some of the heavy 1.9 percent loss suffered the previous day.

News that Chinese regulators are planning a tough clampdown on wealth management products to curb risks to the country’s banking system had weighed heavily on Chinese stocks, but investors are still wading through the details.

Japan’s Nikkei fell 0.7 percent, hurt by a stronger yen and nerves before the Bank of Japan’s monetary policy decision on Friday.

“The best-case scenario for the market is that the BOJ decides to increase government debt purchases without cutting interest rates further into negative territory,” said Hikaru Sato, a senior technical analyst at Daiwa Securities in Tokyo.

“But the BOJ can’t save face if it does not cut rates into negative territory after it introduced the negative interest rate policy (in January), so we need to brace for such possibility, too.”

Wall Street shares ended little changed overnight following the Fed’s policy decision to leave interest rates unchanged.

The Fed did say, however, that near-term risks to the U.S. economic outlook had diminished, opening the door for a potential near-term hike in the eyes of many.

But the Fed also noted that inflation expectations were on balance little changed in recent months, and gave no firm indication of whether it would raise rates at its next policy meeting in September.

“While a number of investment banks have increased their internal probability models for a September hike, the interest rate markets have gone the other way and priced out the prospect. The reverberations of this re-pricing can be seen in weakness in the USD and a bold rally in gold,” wrote Chris Weston, chief market strategist at IG in Melbourne.

The Fed’s latest policy statement spurred traders to favor longer-dated U.S. Treasuries over shorter-dated issues, pushing the yields on 10-year notes and 30-year bonds to 1-1/2-week lows as prices rose.

Spot gold hovered near a two-week high of $ 1,342.18 an ounce touched overnight when it gained 1.4 percent. Higher interest rates tend to diminish the appeal of non-yielding gold.

The dollar index .DXY slipped to a nine-day low of 96.545, pulling back sharply from a 4-1/2-month high of 97.569 scaled early in the week.

The euro, which gained 0.7 percent overnight, edged up to a nine-day high of $ 1.1075 .

The dollar was down 0.3 percent at 105.11 yen JPY=, with caution over potential monetary easing by the BOJ limiting the greenback’s losses.

Against the broadly weaker U.S. currency, the Australian dollar was up 0.2 percent at $ 0.7510 and sterling was steady at $ 1.3218.

U.S. crude CLc1 rose 0.4 percent to $ 42.10 a barrel on bargain hunting after sliding to a three-month low of $ 41.68 on Wednesday after news U.S. crude and gasoline stocks had surged, reflecting weak demand during the peak summer driving season.

Brent crude LCOc1 gained 0.3 percent to $ 43.61 a barrel.