Asian shares inched higher while the dollar was pinned to one-year lows on sterling and the euro on Thursday as Federal Reserve minutes showed policymakers were ready to start cutting U.S. interest rates.
The minutes said the "vast majority" felt that if data came in as expected, a September cut was likely to be appropriate and in response U.S. stocks rose, bonds rallied and the dollar fell.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.2% in early trade and Japan's Nikkei .N225 rose 1%. Hong Kong's Hang Seng .HIS was up 0.7%.
The euro EUR=EBS stood at $1.1151 and traded as high as $1.1173 overnight, its highest since the middle of last year, above chart resistance at $1.1139 and with the way open to the 2022 high around $1.1276. Sterling GBP=D3 bought $1.3096 and hit a more than one-year high of $1.3119 overnight.
"The unequivocal signal from the (Fed) minutes has been the catalyst for the latest leg down in the U.S. dollar," said National Australia Bank's head of currency strategy, Ray Attrill.
"It is likely that the break above $1.30 on cable looks sustainable and similarly for the euro...we're talking about a potentially a $1.10-$1.15 range in coming weeks," he said.
Checks on the dollar's weakness may come from U.S. jobs data on Sept. 6 or even purchasing managers index (PMI) data due later today if it confounds market bets on interest rate cuts, or shows softness in Europe that weighs on the euro, he said.
Japan's flash manufacturing purchasing managers' index (PMI) survey showed activity shrinking, though barely, and services expanding.
Interest rate futures markets have fully priced a 25 basis point rate cut in the U.S. next month, with a 1/3 chance of a 50 bp cut and more than 200 bps of cuts by July 2025. FEDWATCH
Treasuries rallied overnight on the Fed minutes and a large - although expected - downward preliminary revision to U.S. hiring numbers over the past year.
Ten-year yields US10YT=RR were broadly steady at 3.81% on Thursday in Asia and two-year yields US2YT=RR held at 3.94%.
U.S. ESc1 and European STXEc1 equity futures were broadly flat and commodities sounded a note of caution.
Brent crude futures LCOc1 have slid nearly 6% through August so far at $76.04 a barrel and are close to testing the year's lows as swelling U.S. crude stocks and a weakening demand outlook in China have raised pessimism.
"Soft landings are the exception not the rule and the first 200 days following the first rate cut tend to be challenging for equities, because it signals a deteriorating growth and profits environment," said Nick Ferres, CIO at Vantage Point Asset Management in Singapore.
The weak dollar kept gold XAU= above $2,500 an ounce. Shares in Australian miner Whitehaven Coal (WHC) jumped 8% after it announced the sale of a $1 billion stake in its Blackwater mine in Queensland to Japanese steelmakers.
South Korea's central bank left interest rates on hold, as expected, but it's laying the groundwork for cuts as it downgraded forecasts for growth and inflation.
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