The stronger dollar held sway over financial markets after Federal Reserve meeting minutes boosted prospects of an interest-rate hike in June, with the yen nursing losses near a three-week low as crude oil and copper futures extended declines.
Japan's currency traded beyond 110 per dollar after the Fed record showed most officials want to raise borrowing costs next month should the U.S. economy continue to improve. The greenback's gains damped the outlook for commodities, with oil falling a second day and copper futures down more than 0.7 percent. The yen's retreat boosted Japanese index futures, while contracts South Korean stocks fell with equities in Wellington. Australian government debt tracked a selloff in Treasuries, while gold tried to rebound.
The Fed minutes jolted markets that had been swinging around amid uncertainty over the U.S. central bank's intentions. The signal that next month's gathering may be in play came a day after strong data on consumer inflation, housing starts and industrial production, and sent odds on a rate hike in June to more than 30 percent, from just 4 percent a week ago. The reinvigorated speculation over U.S. borrowing costs comes ahead of a meeting of the Group of Seven finance ministers, where Japan is likely to push further fiscal spending as the answer to reigniting lukewarm economic growth.
"The minutes showed that the policy makers' desires to raise rates in June exceeded the market's expectation for action," Mitsushige Akino, an executive officer at Ichiyoshi Asset Management Co in Tokyo, said by phone. "The U.S. economy is doing so well that the FOMC can hike rates. But the global economy is on the decline and investors are not sure whether the Fed can really increase interest rates or not," he said, referring to the Fed Open Market Committee.
Currencies
The yen was little changed at 110.18 per dollar as of 8:48 a.m. Tokyo time, following last session's 1 percent slump. The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, jumped 0.8 percent on Wednesday, the most since Nov. 6.
"The minutes suggest that the odds of a June hike or even a signal in June for a July hike are more likely than the market was prepared for," said Bipan Rai, executive director of foreign-exchange strategy at Canadian Imperial Bank of Commerce in Toronto. "The greenback should be bid here."
Japan reports on home loans and machinery orders Thursday, and Australian jobs data is also due. The Philippines updates on gross domestic product and Malaysia, Indonesia and Hong Kong all review interest rates.
One-month non-deliverable forwards on the Malaysian ringgit slipped at least 0.3 percent with similar contracts on the Indonesian rupiah given the dollar's resurgence.
Stocks
Nikkei 225 Stock Average futures were bid 0.8 percent higher in Osaka, with yen-denominated contracts on the Chicago Mercantile Exchange up 0.6 percent to 16,810.
"Shares have been oversold so we're likely to see companies with attractive valuations being bought back," Ichiyoshi Asset's Akino said. "I'd expect stocks to show a high correlation with currency markets going forward."
New Zealand's S&P/NZX 50 Index, the first major stock measure to start trading each day, slipped 0.5 percent. Futures on Australia's S&P/ASX 200 Index added 0.1 percent, while those on the Kospi index in Seoul fell that amount in most recent trading. Futures on Hong Kong's Hang Seng and Hang Seng China Enterprises indexes added at least 0.5 percent, while those on the FTSE China A50 Index climbed 0.2 percent.
Futures on the S&P 500 added 0.1 percent early Thursday. A rally of as much as 0.7 percent in the U.S. benchmark petered out Wednesday as investors sold stocks that provide high dividend yields after the 10-year Treasury rate spiked as much as 11 basis points.
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