USD in a Narrow Range Awaiting FOMC Rate Decision

Market Reviews

US dollar is trading mixed against major currencies in anticipation of the Fed’s rate statement. The British pound is trading as the weakest one in Asia, followed by euro. Australian dollar rises, boosted by strong growth in Chinese stocks. New Zealand dollar increases on strong growth in business confidence.

Japanese Nikkei rose by 0.36%, Singapore Strait Times gained 0.81%. Both Hong Kong HSI (up 1.83%) and China Shanghai SSE (up 1.57%) are boosted by the MSCI news. It is reported, that MSCI is considering to increase its A shares in the MSCI indexes. The current proposals including adding the weight of China A Large Cap securities from 5% to 7% in two phases, 7.5% each in May and August 2019. Also ChiNext could be added to the list of eligible stock exchange segments in May 2019. China A Mid-Cap securities with 20% included factor in one phase in May 2020.

Investors are waiting for the results of a two-day meeting of the US Federal Reserve. The FOMC will finish its two-day policy meeting later today, which is expected to raise interest rates for the eighth time since late 2015. Investors also expect to raise rates before the end of the year, although the forecast for 2019 is less clear.

The Asian Development Bank (ADB) lowered its economic growth forecasts amid escalation of the US-China trade war. GDP growth for developing Asia is expected to be 6.0% in 2018. However, 2019 growth projection was reduced by 0.1% to 5.8%. China’s 2019 growth forecast was cut from 6.4% to 6.3%. For 2018, growth projection was kept unchanged at 6.6%.

Today’s data showed, that New Zealand trade deficit widened sharply to NZD -1.484m in August versus expectation of NZD -930m (the largest monthly deficit on record). Exports rose 9.9% yoy to NZD 4.1B. However, imports jumped sharply by 14% yoy to NZD 5.5B, the third highest total on record. It’s also the fourth straight month of imports above NZD 5B.

Exports to China rose 20% yoy to NZD 870M, to EU rose 12% to NZD 462M, to US rose 14% yoy to NZD 371m and to Japan rose 28% yoy to NZD 302m. However, export to Australia was down -7.4% yoy to NZD 791m. Petroleum and products led the imports rise, up NZD 186m (50%) to NZD 563m.