Wall Street closed at record highs once again on Tuesday, but Asian stocks haven’t followed the trend, instead remaining fairly stable, rather than heading higher. Japan’s Nikkei 225 index was trading flat as of 11:39 a.m. HK/SIN while Hong Kong’s Hang Seng index was up a modest 0.26 percent.
The dollar edged up slightly against its primary trading partners in early Wednesday trade, with the dollar index heading slowly but steadily away from 2 ½ year lows hit on September 8. The dollar index was trading at 91.74 .DXY shortly before noon in Hong Kong, down slightly from 91.855 hit earlier in the session. The dollar was down slightly against the yen, trading at 111.47. It was also slightly lower against the euro, trading at $1.2007.
Currency markets showed little reaction to U.S. President Donald Trump’s address at the U.N. General Assembly on Tuesday during which he commented that the U.S. would “totally destroy” North Korea if the country continued with its nuclear challenge.
Will the Fed Move Markets?
Analysts are mixed as to whether the Fed’s announcement and Chair Janet Yellen’s statement later today will jolt the markets in a significant way as markets have remained muted in advance of the event, despite the momentous news expected. The Federal Open Market Committee is expected to announce later that it will begin reversing its quantitative easing program, a move which could lower bond yields in the short term and then send them higher, some analysts believe.
The Fed has never made a policy move of this nature before, but markets seem to be slow to react – at least in advance of the announcement. "It is, at least in our assessment, a little surprising the market has not really responded more to the expectations for overall balance sheet reduction," Mark Cabana, head of U.S. short rate strategy at Bank of America Merrill Lynch told CNBC. "While the total amounts will start small, they're going to increase pretty quickly. Next year we're going to have $230 billion that comes off the Treasury portfolio and $150 billion that comes off the mortgage portfolio… By the end of 2021, you're looking at a cumulative impact of $1.4 trillion. The market should be efficient and be pricing it in already."