Her remarks stood in contrast to more hawkish members of the Federal Open Markets Committee who say they fear inflation and an overheating economy.
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USA stocks led global shares higher on Monday after Federal Reserve policymakers sounded cautious notes on near-term interest rate increases, while the US currency slipped.
The dollar, on the other hand, nursed losses against its peers after Brainard reiterated her dovish views and warned against a rush to raise rates.
MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.4 per cent, after tumbling 2.4 per cent on Monday. Japan’s benchmark Nikkei 225 index lost 1.7 percent and South Korea’s Kospi slid 2.3 percent. Hong Kong’s Hang Seng rose 1.1 percent and Shanghai was flat.
Despite her suggestion that it may be too soon for the Fed to resume raising rates, Brainard agreed in her speech that by most measures, the USA job market is steadily improving.
“The dollar for the most part is on a slightly better footing than it was last week, based on some expectations that interest rates still could raise this month when the Fed meets”. Some analysts had raised the probability she might signal the central bank would increase interest rates at the upcoming meeting. “All the talk about a possible rate hike in September turned out to be noise”. As the last Fed official to speak before next week’s meeting, she spurred a decrease in the odds of a September rate increase to 22 percent from 32 percent a week ago.
Japan’s Topix index fell 0.2 percent, erasing earlier gains of as much as 0.6 percent as the yen strengthened for a second day.
The dollar slipped 0.3 percent to 101.580 yen while the euro traded slightly higher at $1.1238.
“The rally that we saw in United States trading after those (Brainard’s) comments is one of the reasons why we are seeing such a positive performance today across the Asia-Pacific region”, said Michael McCarthy, chief market strategist with CMC Markets.
But the bigger cause of the selloff was likely a rise in European long-term bond yields on worries that European Central Bank may not buy as many assets next year as investors had expected.
This spread between three-month Libor and three-month OIS was last at 0.430 percent, compared with 0.434 percent on Monday. Brent crude, the benchmark for global oil trading, lost 88 cents to $47.44 a barrel in London.
Some market players think the BOJ will only announce the framework of future easing without making a major policy change such as cutting interest rates further.
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Meanwhile, the markets pondered political developments in the USA and their potential financial implications.
