Asian markets experienced fluctuations on Wednesday as traders grappled with another record-setting day on Wall Street, keeping a close watch on the Federal Reserve's policy meeting.
The decision-makers are widely anticipated to maintain interest rates at a two-decade high.
However, the focal point of interest lies in their "dot plot," which outlines projections for rate cuts this year.
At the onset of 2024, markets had factored in up to six cuts, but strong data, particularly related to persistent inflation, has prompted investors to revise this down to three.
This adjustment aligns with the Fed's December projection, but concerns persist that policymakers might lower their outlook to just two cuts, or 50 basis points.
Citigroup's Veronica Clark cautioned, "It would only take two participants to move their dots to shift the median to 50 basis points of cuts for this year."
Despite these concerns, Wall Street investors remained positive, driving all three main indexes higher, buoyed by a tech rally, with the S&P 500 marking another record.
JP Morgan economists noted in a recent investor note, "Since the start of this year, expectations about 2024 central bank easing have been pared back materially.
But that has not disrupted the general trend toward easing in global financial conditions."
In Asia, markets showed mixed trends through the morning session. Hong Kong, Shanghai, Sydney, Seoul, Singapore, Taipei, and Manila saw slight gains, while Jakarta and Wellington experienced losses.
The yen continued to weaken after the Bank of Japan indicated that its first interest rate hike in 17 years, conducted on Tuesday, would not likely be followed by more in the near future, signaling the end of its ultra-loose monetary policy.
Speculation that the Fed might revise down its rate cut projections also weighed on the Japanese currency.
Looking ahead, the Bank is expected to maintain its accommodative policy stance unless it perceives significant upward pressure on underlying inflation, according to Duncan Wrigley and Kelvin Lam at Pantheon Macroeconomics.
Key figures around 0230 GMT:
- Hong Kong - Hang Seng Index: UP 0.2 percent at 16,569.60
- Shanghai - Composite: UP 0.1 percent at 3,064.28
- Tokyo - Nikkei 225: Closed for holiday
- Dollar/yen: UP at 151.17 yen from 150.88 yen on Tuesday
- Euro/dollar: DOWN at $1.0864 from $1.0867
- Pound/dollar: DOWN at $1.2717 from $1.2721
- Euro/pound: UP at 85.44 pence from 85.40 pence
- West Texas Intermediate: DOWN 0.3 percent at $82.46 per barrel
- Brent North Sea Crude: DOWN 0.3 percent at $87.14 per barrel
- New York - Dow: UP 0.8 percent at 39,110.76 (close)
- London - FTSE 100: UP 0.2 percent at 7,738.30 (close)