Asian Equities Lower as U.S. Dollar is Higher

The dollar tested a 12-1/2-year peak against the yen on Tuesday after a spate of mostly upbeat U.S. data reinforced expectations that the Federal Reserve would raise interest rates this year, while Asian shares were little changed.  MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down in early trade, while Japan’s Nikkei stock index .N225 edged up about 0.1 percent.

Australian shares .AXJO were up about 0.3 percent, ahead of the Reserve Bank of Australia’s policy decision at 0430 GMT. The bank is expected to keep rates on hold at a record low of 2.0 percent.  “There’s been just as much improvement as deterioration in Australian and Chinese data since the last monetary policy meeting in May so between the exchange rate and data, the RBA has every reason to maintain a neutral bias,” Kathy Lien, managing director at BK Asset Management in New York, said in a note to clients.

On Wall Street on Monday, U.S. stocks began the month with modest gains after the data. Consumer spending remained flat in April, but construction spending and manufacturing gained momentum, backing the view that the U.S. central bank is on track to begin to hike rates later this year.  The economic reports helped U.S. Treasury yields rise to one-week highs, giving the greenback a lift. In Asian trading on Tuesday, the yield on benchmark 10-year notes US10YT=RR stood at 2.182 percent, not far from its U.S. close of 2.192 percent on Monday.