By Ankur Banerjee
SINGAPORE (Reuters) – Gold prices rose to a record high and the dollar rose again on Wednesday, keeping pressure on the yen and euro, while shares in Asia faltered as investors were reluctant to place big bets ahead of a fiercely controversial period. American elections.
Changing expectations about how quickly and deeply the Federal Reserve will cut rates have also hurt risk sentiment, with traders now anticipating that the US central bank will moderate in its easing.
That has pushed US Treasury yields to a three-month high and the dollar to multi-month highs against the euro, sterling and yen, which is now back at $150 per dollar. prompting verbal warnings from Japanese officials.
MSCI’s broadest index of Asia-Pacific shares outside Japan was last 0.06% higher. Tokyo’s Nikkei was slightly lower in early trading.
“In-range volatility is becoming the norm as markets prepare for pivotal weeks including the US presidential election and a tough corporate earnings agenda,” said Anderson Alves, a trader at ActivTrades.
Chinese and Hong Kong stocks opened steadily on Wednesday as promises of government support for the economy supported major indexes to settle higher.
Shifting momentum toward a likely Donald Trump presidency is a focus for investors, with Trump’s policies, including tariffs and restrictions on undocumented immigration, expected to increase inflation. This in turn has supported the dollar on expectations that US interest rates could remain relatively high for longer than expected.
Trump’s chances of beating Vice President Kamala Harris, the Democratic nominee, have been increasing on betting websites recently, although polls show the race for the White House is still too close to call.
With less than two weeks to go before the November 5 election, investors are concerned about market volatility.
The yield on US 10-year benchmark bonds stood at 4.216% in Asian hours, after hitting a three-month high of 4.222% in the previous session.
“The sell-off in government bonds has deepened this week as markets recognize that the Fed risks reigniting inflation if it turns into a strong economy,” said Prashant Newnaha, a senior rates strategist for Asia-Pacific rates at TD Securities.
“Trump’s improving election prospects also dampen market expectations that the Fed will continue to ease in 2025 and the possibility that the Fed will be on the sidelines for six months next year cannot be ruled out.”
Markets have currently priced in a 41 basis points (bps) cut for this year, with another 100 basis points (bps) priced in next year.
