Asian shares steady amid caution before Fed decision

Friday, 14 September 2012 00:01 - - {{hitsCtrl.values.hits}}

Reuters: Asian shares steadied in choppy trade on Thursday ahead of the US Federal Reserve’s decision later in the day, as investors remained cautiously optimistic for further stimulus action to bolster the world’s largest economy.

Commodities from oil to gold were also held in tight ranges as investors awaited the Fed decision expected to be released at 1630 GMT, followed by Chairman Ben Bernanke’s news conference about two hours later.

“Some longs prefer to take profit ahead of the (Fed) meeting, since they’ve already made money on their positions and because there is always a chance that the Fed won’t start another round of quantitative easing - even if many people expect it,” said a Shanghai-based trader with an international firm.

MSCI’s broadest index of Asia-Pacific shares outside Japan was barely changed after earlier easing as much as 0.2 per cent and inching up as much as 0.2 per cent. Australian shares lagged with a 0.3 per cent fall.

“There’s no true indication on why the market should be selling off today but they’re all a bit quiet ahead of that (decision),” said Juliana Roadley, market analyst at Commonwealth Securities, of the Australian stock market.

“I think major investors just don’t want to get in ahead of this major announcement,” said Roadley.

Japan’s Nikkei average rose 0.5 per cent.

The dollar suffered from expectations for QE, which would be equal to printing money and diluting the value of the dollar, with the dollar index measured against a basket of key currencies sticking near a four-month low. The dollar hovered near a 3-1/2 month low against the yen of 77.70.

“We expect the US dollar to emerge weaker both on the day and multi-day/week on delivery of QE. Westpac leans towards purchases of mortgage-backed securities, quite possibly ‘unlimited’ (reviewed meeting by meeting),” said Sean Callow, senior currency strategist at Westpac in Sydney.

A Reuters poll showed economists raised their bets of a third round of Fed bond buying known as quantitative easing (QE) to 65 per cent from 60 per cent in August.