Asian equities ease, US dollar steady

Asian markets ease, dollar firm as FOMC looms

Asian equities have eased over today’s session as investors reduce exposure ahead of tonight’s FOMC. Not helping sentiment was Blinken comments about Chinese aggression, and that, along with China’s ongoing tech crackdown, has made mainland exchanges today’s underperformers.

The overnight session was nondescript, with the S&P 500 edging 0.16% lower, the Nasdaq rising just 0.90%, and the Dow Jones retreating 0.39%. US index futures have edged lower with their Asian peers this morning.

The Nikkei 225 has 0.17% lower, while Samsung’s warning on semi-conductor shortages has seen the Kospi fall by 1.05%. In mainland China, the Shanghai Composite has fallen 0.50%, with the CSI 200 down 0.25%. Both indexes were sharply lower a short time ago, suggesting that China’s “national team” may be in supporting prices at the moment.

Hong Kong has fallen 0.25%, while Taipei is 0.90% lower. Jakarta and Kuala Lumpur have lost 0.35%, while Singapore is unchanged. Australia’s ASX 200 and All Ordinaries have eased by 0.45%.

With investors on the side-lines, Asia is likely to finish modestly in the red, with tech-centric Taiwan and South Korea showing their sensitivity to China and global semi-conductors. Europe will likely open on an even more negative tone as the AstraZeneca suspensions and third waves of Covid sap sentiment across the continent.

The US dollar remains firm

The dollar index climbed just 0.03% to 91.87 overnight, rising another 0.06% to 91.92 in dull trading in Asia. Notably, though, the US dollar remains resilient even as bond tensions ease temporarily. The US dollar’s next directional move will come after the FOMC tonight, but its recent price action hints that inflation fears and higher yield concerns remain front and centre for currency markets.

Covid-19’s resurgence in parts of Europe, and their vaccine woes, are most heavily weighing on the euro amongst the major currencies. EUR/USD fell to 1.1900 overnight, leaving it vulnerable to further losses initially targeting 1.1840. A daily close below 1.1800 implies deeper losses to the 1.1600 area.

Like yesterday, Asian currencies have reversed the overnight price action. Today’s regional currencies have retreated versus the US dollar after rallying overnight. The net result is noisy range trading, a situation that will continue into the FOMC. A surge in bond yields this evening after the meeting will leave Asian currencies nursing losses tomorrow morning.

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