MSCI’s broadest index of Asia-Pacific shares outside Japan.MIAPJ0000PUS was flat, sitting 0.5 percent below its nine-month peak hit on Thursday.
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Tokyo investors are now eyeing central bank meetings in the United States and Japan as well as the kickoff to Japan’s latest earnings season, said Hitoshi Asaoka, a senior strategist with Mizuho Trust & Banking.
U.S. stock prices marked four straight weeks of gains last week, with the S&P 500 setting another record closing high on Friday.
“Market expectations of the Fed raising interest rates by the end of this year have increased significantly over the last two weeks, and it is likely that the Fed could be conveying a more optimistic message about the U.S. economy”, Vyanne Lai, an economist at National Australia Bank, said. “Globally there remain risks, such as European financial institutions or the Chinese yuan”, said Koichi Yoshikawa, executive director of finance at Standard Chartered Bank in Tokyo.
Upbeat U.S. business activity data out on Friday also added to prospects of a Federal Reserve interest rate hike within the year and supported the greenback.
Though the Fed is expected to keep policy unchanged at a two-day meeting starting on Tuesday, investors will be closely parsing its statement for clues on policy direction.
The dollar was buoyant versus the euro and yen early on Monday as a prevailing risk-on mood continued to support the US currency and possessions.
Dollar interest rates futures, which had priced out any chance of a rate hike this in the days that followed the United Kingdom referendum, are now pricing in about a 40 per cent chance of a 0.25 per centage point increase by the end of year. Against the euro, offered some support by a less downbeat than expected Ifo sentiment survey in Germany, the dollar traded less than a quarter of a cent off Friday’s four-week highs of $1.0955.
The yen showed la imited response to comments from Bank of Japan Governor Haruhiko Kuroda on the sidelines of the G20 meeting.
The Japanese government is also putting together a massive spending package worth about 20 trillion yen ($187.8 billion), government sources told Reuters last week, though actual public spending will be far less than the headline number suggests.
Oil prices hovered near 2-1/2-month lows after having lost about 4 percent last week on renewed worries about a global crude glut.
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Yen-denominated Nikkei 225 futures gained 0.3 percent early Monday, extending Friday’s 0.3 percent advance as the yen slipped 0.1 percent to 106.23 per dollar, following a 0.3 percent drop in the previous session.
