Dollar Drops Ahead of Fed Minutes

“After the (jobs) figures in the USA, the market is more and more convinced that the Fed will delay rate hikes and the probability that the ECB will deliver more is also becoming a central scenario”, said BNP Paribas rate strategist Patrick Jacq.

The pan-European FTSEEurofirst 300 index also wobbled then clawed back from initial 0.4 percent falls.

Following Asia’s mixed performance, spread-betters forecast a flat to modestly higher open for Britain’s FTSE, Germany’s DAX and France’s CAC.

Energy shares in Asia surged Wednesday after oil prices hit a one-month high, leading the region’s markets higher amid speculation that the USA and Japan will continue their easy-money policies. “However, it is the least likely to be used in the near term”, strategists at Barclays said in a note to clients.

Elsewhere, India’s Sensex was up 0.6 percent, Indonesia’s Jakarta Composite index was rallying 1.7 percent, Malaysia’s KLSE Composite was gaining 0.9 percent and Singapore’s Straits Times index was up 1.4 percent, while the Taiwan Weighted closed half a percent higher.

The Canadian dollar rose to its highest levels in more than two weeks to C$1.3065 to the greenback on Monday.

“As Fed rate hike expectations are pushed back, stocks and commodities saw a big rebound and eased risk aversion”, Etsuko Yamashita, chief economist at Sumitomo Mitsui Banking Corp, told Bloomberg News.

“Short-covering by those who had shorted stocks on those worries will likely support the market for a while”.

But the benchmark Nikkei Stock Average NIK, +0.75% finished up for a sixth straight day, at its highest level in nearly a month, a sign a few investors anticipate action at the Bank of Japan’s next policy meeting, set for October. 30.

Later in the session, the Fed will release the minutes of its September meeting. But a surprise can not be ruled out, and pressure is building on the central bank to act.

The BOJ is expected to announce no policy changes when it concludes a two-day meeting on Wednesday in Tokyo.

Diminishing expectations that the U.S. Federal Reserve will raise interest rates this year could allow the yen to strengthen, precipitating another round of monetary easing by the Bank of Japan, BOJ watchers say.

That boosted sentiment on risk assets, which have been long hit by threats of higher dollar borrowing costs as well as concerns that growth in China may be falling to its slowest in many years.

Brent crude oil futures rose $1.72 to settle at $53.05 a barrel, while USA crude futures settled up $1.62 at $49.43.

The euro was lower against the yen, with EUR/JPY down 0.47% to 134.88. The dollar index, which measures the greenback against a basket of six major currencies, was last up 0.15 percent at 95.592.

Meanwhile, the USD/JPY was lower 119.7450 Yen, a loss of 0.21%; any potential gains for the Japanese Yen were tempered by expectations that the Bank of Japan might add more stimulus later this month.

The Reserve Bank of Australia kept rates at a record low of 2 percent as widely expected, and said Australian dollar is adjusting to lower commodity prices.