HONG KONG: Shanghai led a broad Asian equities rally on Monday on hopes for fresh Chinese economic stimulus, while the dollar suffered more losses on expectations the Federal Reserve will delay an interest rate hike until next year.
The greenback had edged up at the start of the day—clawing back some of last week’s losses—after the vice chairman of the Fed raised the prospect that borrowing costs could still go up in 2015 despite a global slowdown.
The recent rally across assets comes after a torrid July-September quarter that saw trillions wiped off stock valuations and high-yielding, or riskier, currencies tumble.
Global markets went into meltdown in August after China devalued its yuan currency, fanning worries about the state of the world’s number two economy, while traders were also on edge over the expected US rate rise.
However, with China due to release key indicators this week, including on trade and inflation, dealers are hoping Beijing will announce more economy-boosting measures.
As well as a slew of targeted stimulus for certain sectors such as property, leaders have cut interest rates five times since November and lowered the amount of cash banks must keep on reserve three times in 2015.
While analysts are hoping for further reductions in both as the world’s number two economy continues to struggle, a closely watched gauge of factory activity this month showed a slight improvement, suggesting a corner may have been turned.
Talk of further announcement helped the Shanghai stock market end 3.3 percent higher Monday. The index has risen more than five percent since reopening Thursday after a week-long public holiday. However, it is still down more than 30 percent from its June 12 peak, hit by worries about growth.
Among other share markets Hong Kong was 0.73 percent up in late trade, while Seoul ended 0.10 percent up, Taipei surged 1.5 percent by the close and Singapore was 0.9 percent stronger in the afternoon. However, Sydney retreated 0.9 percent by the end after rising every day last week.
‘Rate hike delay likely’
The dollar started the day on a high after Fed vice chairman Stanley Fischer said on Sunday the bank expected to stick to its plan to tighten monetary policy by the end of the year, added that the plans were an “expectation, not a commitment.”
He said that “both the timing of the first rate increase and any subsequent adjustments to the federal funds rate target will depend critically on future developments in the economy.”
While his comments, on the sidelines of the International Monetary Fund’s annual meeting in Lima, do not indicate the Fed will lift rates, they show that policymakers continue to keep it a consideration.
In afternoon trade the dollar was down 0.09 percent lower against the Indonesian rupiah, having shed about eight percent against the unit last week. It also slipped against the Australian dollar, the Thai baht, Indian rupee and South Korean won.
However, it tacked higher versus Malaysia’s ringgit having lost almost seven percent against it so far this month.
“The only data supporting raising the Fed funds rate has been [US] employment, which has begun to shrink in the last quarter,” Evan Lucas, a markets strategist at IG Ltd. in Melbourne, said in an e-mail to clients.
“Coupled with increased talks of the approaching debt-ceiling negotiations, not to mention the 2016 presidential elections, all means we are seeing signs of the [US economy] liftoff being pushed back, as inflation remains nowhere to be seen,” he said, according to Bloomberg News.
The weaker dollar has also helped rally oil prices in recent weeks while bets on a pick-up in demand for the commodity provided further uplift.
Crude prices have risen by more than a quarter since hitting a six-year low in August as worries about a stronger dollar, a supply glut and weak demand ease.
In afternoon trade US benchmark West Texas Intermediate rose 0.87 percent to $50.06 and Brent was up 0.78 percent to $53.06.
On Sunday the secretary general of oil cartel OPEC Abdullah el-Badri said he was confident the market will be “more balanced” next year as non-OPEC production contracts and global demand rises. However, he did admit the “market remains oversupplied.”
His comments come after he said Thursday demand will rise more than projected this year.