Asia shares pause, dollar pressured before Fed meet

Investors exit crowded positions in the US dollar

Asian share markets paused near seven-year peaks on Wednesday while investors exited crowded positions in the US dollar as the Federal Reserve wraps up a two-day policy meeting.

The broad retreat in the US currency came as a string of soft data seemed to push back the day when the Fed might start lifting rates, and defied a jump in Treasury yields.

Trading was thinner on Wednesday with Japanese markets on holiday and little in the way of major data due in Asian time.

That helped the dollar index stabilise at 96.111 after touching the lowest since March 5. The euro stood at $1.0970 > having stopped short of resistance at $1.1000.

 

The dollar fared better on the yen at 118.84 > as Japan's central bank is expected to reaffirm its massive stimulus campaign at a policy meeting on Thursday.

Talk of more policy easing in China has also put a bid under many regional stock markets. MSCI's broadest index of Asia-Pacific shares outside Japan inched up to their highest since early 2008.

Australian stocks eased 0.2% after repeatedly shying away from a major psychological barrier at 6,000.

On Wall Street the Dow had ended Tuesday with gains of 0.4%, while the S&P 500 rose 0.28% and the Nasdaq dipped 0.1%.

Aiding the Dow was a 1.9% gain in IBM shares after the company hiked its quarterly dividend by 18%, the biggest increase in five years.

Apple hit a record high after posting stellar results, but still ended down 1.6%. Shares of Twitter dropped as much as 24% after its results disappointed, before closing with a loss of 18.2%.

The Fed's latest policy statement will come just hours after data are expected to show the US economy grew at a pedestrian 1% annualised pace in the first quarter, partly due to bad weather and a port strike.

The Fed has so far played down the softness in the hope of a rebound in the second quarter, and there have been hints of a much-needed upturn in wages and inflation.

"Investors are approaching FOMC with the view it will bore as much as possible. The risk is that what is neutral to the Fed may be surprisingly upbeat to the market," said analysts at Citi.

"We would not see this as a big near-term boost to the dollar and bond yields, but more a reminder that the Fed remains hopeful that data will improve sufficiently for a lift off in September."

Yields on 10-year US Treasury paper were near one-month highs at 2.010% on Wednesday >, having drifted up from 1.90% at the start of the week.

Oil prices slipped as expectations US crude stockpiles have reached record highs offset security scares in the Middle East and support from a softer dollar.

Brent crude was quoted 11 cents lower at $64.53 a barrel, while US crude fell 17 cents to $56.89.