Asian stocks hold ahead of RBA decision, Ueda speech by Reuters

By Ankur Banerjee

SINGAPORE (Reuters) – Asian shares were perched at their highest in more than two months on Tuesday as expectations of more U.S. interest rate cuts kept risk-on sentiment up as investors awaited a policy decision. from the central bank of Australia.

In a much-anticipated news conference, China’s top financial authorities, including the central bank, unveiled a series of measures to help the stuttering economy, including measures to cut mortgage rates for existing homes.

The Reserve Bank of Australia is expected to keep an eye on interest rates, but the Federal Reserve’s 50 basis point cut last week has raised some expectations that Australia will follow the Fed.

“The RBA is likely to stick to its dovish stance for now, aiming to keep inflationary expectations anchored,” said Charu Chanana, head of currency strategy at Saxo.

“A potential pivot could only come at the November 5 meeting, depending on subsequent labor market data and the third quarter CPI report.”

That left markets flat, with MSCI’s broadest index of Asia-Pacific shares outside Japan 0.04 percent higher at 586.31, levels last seen on July 15.

was the biggest mover in early trade, rising 1.69 percent to a near three-week high ahead of a eagerly awaited speech by Bank of Japan Governor Kazuo Ueda.

China’s central bank cut its 14-day repo rate by 10 basis points on Monday, days after disappointing markets by not cutting long-term rates.

Overnight, US stocks closed modestly higher as traders digested the Fed’s big move last week, with policymakers explaining the need for the 50bp cut.

“I’m comfortable with a starting move like this — the 50 basis point cut in the federal funds rate announced last Wednesday — as a demarcation that we’re getting back to thinking more about both sides of the mandate,” the Chicago Fed president said , Austan Goolsbee. “If we want a soft landing, we can’t be behind the curve.”

Markets are currently evenly split on whether the US central bank will opt for another 50 bps cut or a 25 bps cut in November, CME’s Fedwatch tool showed. They are priced at 76 bps of relaxation this year.

Elias Haddad, senior markets strategist at Brown Brothers Harriman, said the market is overestimating the Fed’s ability to ease. “However, it will likely take strong US jobs data to trigger a significant upward reassessment of Fed funds rate expectations.”

The next nonfarm payrolls report is due Oct. 4, and until then, Haddad said a more accommodative Fed and a strong U.S. economy provide support for financial market risk and could further undermine the dollar, especially against currencies sensitive to growth.

which measures the US currency against six rivals, was at 100.95, not far from the one-year low of 100.21 hit last week. The yen was little changed at 143.65 per dollar. (FRX/)

The euro held steady at $1.11055 in early Asian hours, down about 0.5 percent on Monday as business activity reports for the euro zone economy disappointed, raising expectations for more interest rate cuts by the Bank Central European this year.

The Australian dollar fell 0.15% to $0.6828, but is nearing a nine-month high hit on Monday.

In commodities, oil prices were slightly higher in early trade, with futures up 0.26% to $74.09 a barrel, while futures were 0.3% higher at $70.6. Oil prices fell on Monday on demand concerns as well as weak economic data in Europe.