· The dollar was on the defensive on Tuesday, weighed by growing expectations the Federal Reserve would adopt a more accommodative policy outlook this week and concerns about slower U.S. economic growth.
The dollar index, which measures the greenback against a basket of six major currencies, dipped 0.1 percent to 96.43, hovering close to a two-week low touched overnight.
The index has lost 1.3 percent after hitting a three-month high of 97.710 on March 7, on views the Fed will strike a dovish tone at its two-day policy meeting due to start later on Tuesday.
· Many investors expect the Fed to keep its benchmark overnight interest rate unchanged and stick to its pledge of a "patient" approach to monetary policy.
· "Around 30 percent of market participants are expecting a rate cut this year," said Kumiko Ishikawa, senior analyst at Sony Financial Holdings.
"The focus is on the extent to which the Fed is able to take that into account without shocking the market," she added.
· Fed funds futures last priced in about 30 percent chance of a rate cut in 2019, compared with almost zero percent seen earlier this month.
· Masafumi Yamamoto, chief currency strategist at Mizuho Securities, said while the market is expecting more accommodative sentiments from the meeting, equity markets were unlikely to react positively to such a development.
"If the Fed really shows a gloomy outlook for growth and rates, then it's also a negative for U.S. equities. Then that will be a negative for the dollar," Yamamoto said.
"There is a high risk that whichever the outcome is, it will push down dollar/yen."
· Sterling also gained, rising almost one-fifth of a percent to $1.3274. It had seesawed overnight after the speaker of Britain's parliament said Prime Minister Theresa May's Brexit deal could not be voted on again unless a different proposal was submitted.
The Bank of England is expected to leave its interest rate outlook unchanged at a policy meeting on Thursday due to the deep uncertainty over Britain's decision to leave the European Union.
· The euro was slightly higher at $1.1344.
· FedEx reported declining international revenue as a result of unfavorable exchange rates and the negative effects of trade battles.
“Slowing international macroeconomic conditions and weaker global trade growth trends continue, as seen in the year-over-year decline in our FedEx Express international revenue,” says Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer.
FedEx reported weaker-than-expected third-quarter earnings and revenue after the closing bell on Tuesday, and cut full-year guidance.
· Bank of Japan policymakers disagreed on how quickly the central bank should ramp up monetary stimulus, minutes of their January rate review showed, as heightening overseas risks threatened to derail the country’s fragile economic recovery.
While most members agreed it was appropriate to maintain the BOJ’s current stimulus program, one of them said the central bank must stress its readiness to take “quick, flexible and bold” action including additional easing, the minutes released on Wednesday showed.
Another member, however, said acting too hastily during times of uncertainty could lead to financial imbalances and unnecessary swings in the economy, the minutes showed.
· Confidence among Japanese manufacturers hit its weakest in two-and-a-half years in March, a Reuters poll showed, as global trade friction fueled concerns that a postwar record growth cycle driven by Abenomics may be over.
The monthly poll, which tracks the Bank of Japan’s (BOJ) closely watched tankan quarterly survey, found confidence fell for a fifth straight month while sentiment in the service sector held steady, suggesting domestic demand is unlikely to offset external risks such as the trade war and China’s slowdown.
Both manufacturers’ and service-sector morale is expected to rise just slightly over the coming three months, underscoring a bumpy road ahead for the world’s third largest economy, according to the Reuters Tankan.
· India has the "best growth story" among global emerging markets, said J.P. Morgan's head of equity research for Asia excluding Japan, as he pointed to relatively stable oil prices and positive earnings projections for the country.
That comes as Goldman Sachs also became more bullish on India, raising its rating on Indian stocks to "overweight" in a Monday report, an indication that it expects a stock or index to outperform its peers.
Speaking to CNBC on Tuesday, J.P. Morgan's James Sullivan predicted that oil prices will stay "relatively stable" at around $60 to $65 per barrel.
Oil is key to India, a net importer of crude, as higher prices lead to a higher import bill and a widening current account deficit — a measure of the flow of goods, services and investments in and out of the country.
· Oil prices were near 2019 highs on Tuesday, supported by supply cuts led by producer club OPEC.
U.S. sanctions against oil producers Iran and Venezuela are also boosting prices, although traders said the market may be capped by rising U.S. output.
U.S. West Texas Intermediate (WTI) futures were at $59.10 per barrel at 0314 GMT, virtually unchanged from their last settlement and close to the 2019 high of $59.23 reached the previous day.
Brent crude oil futures were up 10 cents at $67.64 per barrel, also close to this year's peak of $68.14 reached late last week.
In China, Shanghai crude futures, launched in March last year, bounced 4.5 percent from their last close to 467.6 yuan ($69.64) per barrel, also near 2019 highs of 475.7 yuan a barrel reached during a brief spike in February.
In dollar-terms, this pushed Shanghai crude into a premium over Brent.
Reference: CNBC, Reuters
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