Asian shares stutter, dollar rally pauses as Fed cues eyed
Business
The market is now pricing US interest rates to peak at 5.30% in July.
SINGAPORE, (Reuters) - Asian stocks edged lower on Tuesday as the prospect of the U.S. central bank having to stay on its hawkish path weighed on sentiment, with investors looking to the minutes of the latest Federal Reserve meeting for further monetary policy clues.
MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) eased 0.34% to 531.85, hovering around six-week lows of 529.30 it touched last week.
The index is down nearly 3% this month after jumping 8.6% in January as a slew of robust US economic data reinforced fears that interest rates may need to rise further and stay higher for longer.
The market is now pricing US interest rates to peak at 5.30% in July and remain above 5% by the end of the year, moving away from expectations of deeper rate cuts this year.
Japan's Nikkei (.N225) was 0.01% higher, while Australia's S&P/ASX 200 index (.AXJO) fell 0.52%. China's shares (.SSEC) were set to start flat while Hong Kong's Hang Seng Index (.HSI) opened 0.1% lower.
"The backdrop of inflation concerns in the U.S. is still keeping risks of a tighter than expected monetary policy, and yields remain a key focus as US markets return later today," strategists at Saxo Markets said.
US markets were closed on Monday due to President's Day holiday.
The yield on 10-year Treasury notes was up 3.5 basis points to 3.863%, after touching a three-month high of 3.929% on Friday.
The yield on the 30-year Treasury bond was up 1 basis points to 3.899%, while that of the two-year US Treasury paper, which typically moves in step with interest rate expectations, was up 5.4 basis points at 4.677%.
Investor focus is firmly on the release on Wednesday of the minutes of the Fed's latest meeting when it raised interest rates by 25 basis points.
In the currency market, the dollar hovered just shy of recent peaks as a three-week rally faded, with traders looking to European and U.S. manufacturing data later Tuesday and Friday's core PCE price index to help guide their next steps. /FRX
DBS currency strategist Philip Wee said the market is bracing for another surprise in the PCE data after the strong US nonfarm payrolls and CPI readings this month.
The dollar index , which measures the U.S. currency against six other rivals, was last at 104.01, just below a six-week high of 104.67 it touched on Friday. The euro fell 0.12% to $1.0669, and is set to snap four straight months of gains and end February lower.
The yen weakened 0.12% to 134.40 per dollar, while sterling was last at $1.2022, down 0.13%.
US crude was up 1.02% at $77.12 per barrel and Brent was at $83.80, down 0.32% on the day.
