# Asian shares rise, dollar dips ahead of Fed policy decision
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-11-02
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Asian Shares Climb on Reopening Hopes, Fed Policy in Focus
Meta Description: Get the latest updates on Asian shares rising, led by Chinese stocks on reopening hopes. Stay tuned for the U.S. Federal Reserve's policy decision.
URL: https://financedigest.com/asian-shares-rise-dollar-dips-ahead-of-fed-policy-decisionhtml

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By Stella Qiu

SYDNEY (Reuters) – Asian shares climbed on Wednesday, led by Chinese stocks on reopening hopes, while the dollar sagged as investors braced for the U.S. Federal Reserve’s policy decision later in the day, with many hoping for signs of a slowdown in [future rate hikes](https://www.financedigest.com/dollar-falls-after-fed-raises-rates-forecasts-future-hike.html "Dollar falls after Fed raises rates, forecasts future hike").

[European markets looked set to extend the cautious optimism](https://www.financedigest.com/european-shares-end-higher-on-china-recovery-optimism.html "European shares end higher on China recovery optimism"), with the pan-region Euro Stoxx 50 futures up 0.5%. U.S. S&P 500 futures edged up 0.3% while the Nasdaq futures rose 0.4%.

The world’s biggest [central bank](https://www.financedigest.com/dollar-skulks-at-eight-month-low-central-bank-meetings-in-focus.html "Dollar skulks at eight-month low, central bank meetings in focus") is due to release its policy statement at 2 p.m. EDT (1800 GMT) on Wednesday, with investors set to closely scrutinise the statement and comments from [Fed Chair Jerome Powell for any signal that policymakers are contemplating tempering rate hikes](https://www.financedigest.com/dollar-hits-one-month-high-against-yen-as-traders-bet-on-fed-rate-hike.html "Dollar hits one-month high against yen as traders bet on Fed rate hike").

[Markets widely expect the Fed](https://www.financedigest.com/stocks-up-bond-yields-fall-as-markets-mull-a-fed-policy-pause.html "Stocks up, bond yields fall as markets mull a Fed policy pause") to raise its benchmark overnight interest rate by 75 basis points (bps) to a range of 3.75% to 4.00%, the fourth such increase in a row.

However, traders are split on the size of the hike in December, with futures market [pricing in a 44.5% probability of a 50-bps increase](https://www.financedigest.com/coca-cola-hbcs-annual-profit-beats-warns-of-price-increases.html "Coca-Cola HBC’s annual profit beats, warns of price increases"), according to CME’s Fed tool.

We suspect Chair Powell will try very hard to avoid saying anything that might be misconstrued as a [signal that the inevitable step down in the size of tightening is a pivot toward the end of the tightening cycle,”](https://www.financedigest.com/european-shares-rise-as-us-inflation-data-signals-end-of-rate-hike-cycle.html "European shares rise as US inflation data signals end of rate-hike cycle") said Kevin Cummins, chief U.S. economist at NatWest Markets.

Given that the inflation-related data have yet to show any signs of any moderation, we lean a bit more [toward officials holding off from signalling they are reducing the size of hikes](https://www.financedigest.com/boe-raises-rates-again-as-investors-look-towards-end-of-hikes.html "BoE raises rates again as investors look towards end of hikes") just yet.

Cummins expects the [Fed to step down to a 50 bps hike](https://www.financedigest.com/shares-fall-with-oil-prices-amid-concerns-about-u-s-fed-rate-hikes.html "Shares fall with oil prices amid concerns about U.S. Fed rate hikes") in December.

MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.8% after wobbling earlier in the day, with Chinese bluechips and [Hong Kong](https://www.financedigest.com/citadel-accelerates-hiring-push-in-hong-kong-and-london.html "Citadel accelerates hiring push in Hong Kong and London") stocks reversing losses on hopes that China will ease its tough zero-COVID restrictions.

An unverified note circulating on [social media on Tuesday that China was planning](https://www.financedigest.com/why-no-event-should-be-planned-without-a-social-media-strategy.html "Why No Event Should Be Planned Without a Social Media Strategy") a reopening from strict COVID curbs in March triggered a sharp rebound following last month’s savage selling. But quarantines and business disruptions in China are surging again and some analysts expect no major [policy shifts until well into next](https://www.financedigest.com/yen-trims-gains-as-possible-next-boj-governor-says-current-policy-appropriate.html "Yen trims gains as possible next BOJ governor says current policy appropriate") year or even 2024.

Hong Kong is holding an [investment summit on Wednesday to rebuild the COVID-ravaged city’s](https://www.financedigest.com/investing-in-the-city-thats-investing-in-itself-welcome-to-the-liverpool-of-the-future.html "INVESTING IN THE CITY THAT’S INVESTING IN ITSELF – WELCOME TO THE LIVERPOOL OF THE FUTURE!  ") image as the region’s financial hub, with Chief Executive John Lee pledging it would continue working towards lifting COVID curbs.

Chinese policymakers also reaffirmed their support for [Hong Kong](https://www.financedigest.com/screening-of-winnie-the-pooh-horror-film-cancelled-in-hong-kong.html "Screening of ‘Winnie the Pooh’ horror film cancelled in Hong Kong") and welcomed foreign investors to the city. Hang Seng index surged 2.5%, after a whopping 5.2% in the previous session.

Japan’s Nikkei lost 0.1%.

Overnight, a survey showed U.S. job openings unexpectedly rose in September, suggesting that demand for labour remains [strong despite rate](https://www.financedigest.com/dollar-advances-as-strong-u-s-data-backs-higher-rates-backdrop.html "Dollar advances as strong U.S. data backs higher rates backdrop") hikes. That sparked a reversal in [Treasury yields](https://www.financedigest.com/wall-street-drops-treasury-yields-gyrate-on-fed-chairman-powells-remarks.html "Wall Street drops, Treasury yields gyrate on Fed Chairman Powell’s remarks") and lifted market bets on interest rates to above 5% next year.

U.S. [stocks closed](https://www.financedigest.com/global-stocks-close-in-on-4-week-highs-oil-rises-on-hopes-of-soft-landing.html "Global stocks close in on 4-week highs, oil rises on hopes of ‘soft landing’") lower, with the Dow Jones Industrial Average slipping 0.24%, the S&P 500 shedding 0.41%and the Nasdaq Composite falling 0.89%.

In the currencies market, the [dollar eased](https://www.financedigest.com/wall-street-stocks-power-higher-as-treasury-yields-and-dollar-ease.html "Wall Street stocks power higher as Treasury yields and dollar ease") 0.2% against a basket of major currencies. It fell 0.5% against the [Japanese yen](https://www.financedigest.com/japanese-yen-gains-as-ueda-set-to-be-named-next-boj-governor.html "Japanese yen gains as Ueda set to be named next BOJ governor") to 147.6 yen amid fears of intervention from authorities and thin liquidity. \[FRX/\]

Bank of Japan Governor Haruhiko Kuroda said on Wednesday a [tweak to the central bank’s yield curve control policy](https://www.financedigest.com/yen-retreats-after-boj-policy-tweak-sparked-surge.html "Yen retreats after BOJ policy tweak sparked surge"), which has contributed to the weakness in the yen, could become a future option.

The safe-haven greenback gave up some of the [rapid gains this year in October on speculation the Fed](https://www.financedigest.com/asian-shares-gain-as-fears-about-rapid-fed-hikes-bank-crisis-fade.html "Asian shares gain as fears about rapid Fed hikes, bank crisis fade") might indicate a slowdown in its aggressive tightening campaign.

The [dollar’s retreat](https://www.financedigest.com/dollar-retreats-headed-for-biggest-weekly-loss-since-mid-january-bitcoin-down.html "Dollar retreats, headed for biggest weekly loss since mid-January; bitcoin down") in foreign exchange markets is temporary, according to a Reuters poll of currency strategists, who said the greenback still had enough strength left to reclaim or surpass its recent highs and resume its relentless rise.

“In the Fed’s view, putting the U.S. into a recession is still a lesser evil than not tackling entrenched [price pressures,”](https://www.financedigest.com/oil-prices-dip-on-u-s-crude-reserve-release-inflation-pressure.html "Oil prices dip on U.S. crude reserve release, inflation pressure") said Chris Weston, head of research at Pepperstone.

My own view is the risks are skewed for a hawkish reaction – USD higher, but I will recognise the moves in [rates suggests](https://www.financedigest.com/dollar-firms-after-u-s-labor-data-suggests-more-rate-hikes.html "Dollar firms after U.S. labor data suggests more rate hikes") the market is largely positioned for this outcome.

U.S. Treasury yields were largely steady on Wednesday after reversing much of the losses overnight on the unexpected strength in the [jobs data](https://www.financedigest.com/stocks-mixed-dollar-gains-after-robust-inflation-jobs-data.html "Stocks mixed, dollar gains after robust inflation, jobs data").

The yield on benchmark ten-year notes was [little changed](https://www.financedigest.com/stocks-dollar-little-changed-as-inflation-data-sends-mixed-signals.html "Stocks, dollar little changed as inflation data sends mixed signals") at 4.0422% while the yield on two-year notes eased 4 basis points to 4.5157%.

In commodities, [oil climbed after industry data](https://www.financedigest.com/oil-slumps-on-economic-data-stronger-u-s-dollar.html "Oil slumps on economic data, stronger U.S. dollar") showed a surprise drop in U.S. crude stockpiles, suggesting [demand is holding](https://www.financedigest.com/ibm-beats-first-quarter-profit-estimates-signals-demand-holding-up.html "IBM beats first-quarter profit estimates, signals demand holding up") up. \[O/R\]

U.S. [crude oil](https://www.financedigest.com/oil-dips-after-fed-comments-us-crude-stock-build.html "Oil dips after Fed comments, US crude stock build") futures rose 1.4% to $89.65 per barrel, while Brent crude futures was up 1.2% at $95.82.

Gold was slightly higher, with [spot price](https://www.financedigest.com/spot-prices-up-on-less-solar-rising-french-demand.html "Spot prices up on less solar, rising French demand") trading at $1649.72 per ounce.

(Editing by Shri Navaratnam and Kim Coghill)


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