Asian Stocks Fall as Dollar Strengthens Before Fed; Oil Rebounds 

• Yen weakens as Kuroda says negative rate can be cut further

• Crude climbs toward $37 a barrel before U.S. investories data

Asian stocks fell and the dollar strengthened against most major currencies before a Federal Reserve policy review on Wednesday that’s seen shedding light on the timing of U.S. interest-rate increases.

Japan’s Topix index extended Tuesday’s retreat from a five-week high, while benchmark equity gauges fluctuated in Hong Kong and China. A measure of dollar strength climbed to a one-week high, supported by speculation the Fed will boost borrowing costs in the coming quarter. The yen fell after Japan’s central bank chief said the policy rate could move deeper into negative territory. Oil rebounded toward $37 a barrel ahead of American crude supplies data. U.S. Treasuries held near their lowest levels since January.

“We’re waiting for U.S. monetary policy so its difficult for investors to rush in and buy,” said Chihiro Ohta, general manager of investment information at SMBC Nikko Securities Inc. in Tokyo. “We need to see whether we’ll have one or two rate hikes this year, and whether the next one will come in June.”

Markets are being swayed by divergent monetary policies in the world’s leading economies. Fed funds futures show the odds of a U.S. rate increase by the end of June have shot up to 54 percent from about 6 percent in the past month as data indicated growth is strengthening in the nation. China isn’t headed for a hard landing and the government will ensure expansion hits targets, Premier Li Keqiang said Wednesday in Beijing.

Results of U.S. presidential candidate contests in states including Florida boosted the likelihood that Hillary Clinton will be the Democratic Party’s representative in a November election and kept Donald Trump as the front-runner to secure the Republican Party’s nomination. U.K. Chancellor of the Exchequer George Osborne is scheduled to present his Budget to lawmakers at about 12:30 p.m. in London, ahead of a Bank of England policy review on Thursday.

Stocks

The MSCI Asia Pacific Index dropped 0.6 percent as of 2:32 p.m. Tokyo time. The Topix index declined 0.7 percent, while Taiwan’s Taiex added 0.9 percent. BHP Billiton Ltd. led declines among raw-materials producers, headed for its lowest close in two weeks in Sydney after commodities prices retreated over the last two days.

S&P 500 Index futures advanced 0.1 percent, following the benchmark’s 0.2 percent retreat in the last session.

Currencies

The Bloomberg Dollar Spot Index rose 0.1 percent, climbing for a third day on bets the Fed will reaffirm its commitment to raising interest rates. The U.S. currency will probably respond favorably to signals from the Fed, which will look to keep its options open, Alan Ruskin, Deutsche Bank AG’s global co-head of foreign-exchange research in New York, wrote in a research report.

“This also means leaving the door wide open to a June hike, and even ajar to an April hike,” he wrote, saying the March payrolls report and global risk sentiment will be important deciding factors. “The market will see this as more hawkish than currently discounted.”

The yen retreated 0.2 percent to 113.43 per dollar, after strengthening 0.6 percent on Tuesday as the Bank of Japan kept its policy rate at minus 0.1 percent at a review. The central bank has quite a lot of room to cut the key rate further and theoretically it could go to minus 0.5 percent, Governor Haruhiko Kuroda told parliament on Wednesday.

China’s yuan was headed for its biggest three-day loss since January as the central bank lowered its daily fixing for the currency amid concern a potential tax on foreign-exchange transactions will hurt investor sentiment. It weakened 0.13 percent from Tuesday’s close.

Commodities

West Texas Intermediate crude climbed 1.4 percent to $36.86 a barrel, after sliding 5.6 percent over the past two days as Iran indicated it won’t be joining other major producers in freezing output. It’s tumbled 38 percent since the middle of last year.

U.S. crude inventories increased by 3.2 million barrels last week, according to a Bloomberg survey ahead of government data Wednesday, with a report from the American Petroleum Institute said to indicate an increase of 1.5 million barrels. Total SA Chief Executive Officer Patrick Pouyanne sees the oil market back in balance during 2016, he said in an interview with Le Progres newspaper.

Copper fell 0.4 percent in London, while nickel rose. Gold for immediate delivery was little changed at $1,233.22 an ounce, holding near a two-week low.

“Gold has pulled back over the last few days, which was long overdue after an otherwise continuous rally since the start of 2016,” Jordan Eliseo, Sydney-based chief economist at trader Australian Bullion Co., said in an e-mail. “All eyes will be on the Fed meeting, and any clues as to potential pace of monetary tightening throughout 2016.”

Bonds

The yield on two-year U.S. Treasuries was little changed after ending Tuesday at 0.96 percent, the highest close since Jan. 6. The Bloomberg U.S. Treasury Bond Index has dropped 1 percent since the end of February, headed for its first monthly loss of 2016.

Source: Bloomberg – Asian Stocks Fall as Dollar Strengthens Before Fed; Oil Rebounds

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