Dollar holds gains ahead of Fed decision, Asia markets struggle

The greenback is approaching the 110 yen level not seen since February
AFP

Hong Kong (AFP) – The dollar on Wednesday maintained most of its recent gains ahead of a key Federal Reserve policy announcement, while Asian equity markets struggled to gain traction as investors returned from public holidays across the region.

Technology firms enjoyed healthy gains after Apple released better-than-expected earnings that soothed worries about iPhone sales, and oil prices inched slightly higher after Tuesday’s plunge.

As trading floors reopened after the Labour Day break, attention was on the Fed’s policy decision later Tuesday.

While the central bank is not expected to lift interest rates, its post-meeting statement will be parsed for clues to its plans and any idea of a timetable for future hikes with opinions split on whether it will announce three or four more this year. That is followed by the release Friday of closely watched US jobs data.

A broadly positive outlook for the US economy, along with easing geopolitical and trade worries, has provided some lift to the dollar.

The greenback is testing the 110 yen mark for the first time since the start of February while it has also surged against the pound as the Bank of England puts its own plans for a rate hike on the back-burner.

It is also building on gains against higher-yielding currencies including the Australian dollar, Indonesian rupiah, Mexican peso and Thai baht. The South Korean won was also in retreat after enjoying a rally on the back of Friday’s North-South Korea summit.

“The US dollar bulls continued to lead the charge as traders remain centred favourably on the entrenched US data flow… relative to that from other major economies that are cooling quickly,” said Stephen Innes, head of Asia-Pacific trading at OANDA.

– Apple supports tech firms –

“It’s now over to the (Fed policy committee) to hold up their side of the bargain as so far, the heavy lifting for the greenback has fallen on the global central bank community, which has turned dovish on the first hint of economic slack.”

Wall Street’s three main indexes ended mixed with analysts warning the strong earnings season could be be a high mark for the year.

The Nikkei in Tokyo ended the morning session 0.3 percent lower and Hong Kong slipped 0.6 percent. Shanghai edged up 0.1 percent, Sydney rose 0.5 percent and Singapore was 0.7 percent higher.

Wellington and Manila rose but Seoul, Taipei and Jakarta turned negative.

Technology firms won some welcome support after Apple reported a hefty jump in second-quarter earnings and unveiled a new $100 billion share buyback plan, while boss Tim Cook was optimistic about the outlook.

The news soothed recent worries about the iPhone-maker, which is a major customer for suppliers in the region.

Component-makers were mostly up with Tokyo-listed Alps Electric up three percent, while Foxconn jumped one percent in Taipei. LG Display added 0.6 percent in Seoul.

Among other tech firms AAC Technologies firmed 2.5 percent in Hong Kong and market heavyweight Tencent was up 0.7 percent.

Traders are keeping tabs on trade developments as a high-level US trade delegation heads to China this week for talks. The meetings come after President Donald Trump decided Monday to extend exemptions for the European Union, Canada and Mexico from steel and aluminum tariffs announced in March.

– Key figures around 0240 GMT – 

Tokyo – Nikkei 225: DOWN 0.3 percent at 22436.46 (break) 

Hong Kong – Hang Seng: DOWN 0.6 at 30,633.14

Shanghai – Composite: UP 0.1 percent at 3,084.28

Pound/dollar: DOWN at $1.3606 from $1.3617 at 2100 GMT

Euro/dollar: DOWN at $1.9991 from $1.9994 

Dollar/yen: UP at 109.84 yen from 109.87

Oil – West Texas Intermediate: UP 14 cents at $67.39 

Oil – Brent North Sea: UP five cents at $73.18 per barrel 

New York – Dow: DOWN 0.3 percent at 24,099.05 (close)

London – FTSE 100: UP 0.2 percent at 7,520.36 (close)

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