Asian dealers cautious ahead of Fed meeting

Asian dealers cautious ahead of Fed meeting

U.S. stock prices recently hit all-time highs.

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Expectations began to rise as several Fed officials, including Chair Janet Yellen, spoke in support of raising interest rates sooner rather than later.

The rate increase expected on March 15 will be the second in four months, a pace unseen since the peak of the United States housing boom in 2006.

Sterling, as a result, held gains against the dollar rising 0.5 percent to $1.2229 GBP= . That's because, with the widely-telegraphed rate increase all but baked into expectations, the market's attention is now turning to the projected path of interest rates - that is, how quickly will the Fed raise rates later this year.

Five-year variable-rate mortgages are available at rates as low as prime minus 0.80% (1.90% today) for high-ratio buyers, and at rates as low as prime minus 0.60% (2.10% today) for low-ratio buyers.

US February employment data published on Friday further cleared the way to an interest rate rise, with the economy adding another 235,000 jobs.

The Federal Reserve is expected to raise its key interest rate on Wednesday.

The month of March has been cruel to Ms Yellen in the past. While there are several price indexes that track different products and services, the Fed's favored inflation measure in January hit its fastest 12-month pace in four years.

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"We don't think that tighter monetary policy will be the undoing of the USA stock market", said Capital Economics' chief market economist John Higgins.

Investors were awaiting the outcome of the Fed's two-day policy meeting on Wednesday, with a rate hike nearly fully priced in by markets.

While the short-term momentum arrow for interest rates is clearly pointing higher, longer-term trends, like aging demographics and the dampening effect that high debt levels have on economic growth rates, still imply that they will remain lower for longer. But the Fed is focused on how many people say they are both not working and actively seeking work, and this number, reflected by the unemployment rate, is back to pre-recession levels.

Four stocks fell on the New York Stock Exchange for every one that rose.

The dollar, which tends to strengthen as rate climb, was up for the first time in three days, but prices of safe-haven gold also rose due to uncertainty ahead of elections in Europe. Societe General's head of foreign exchange strategy Kit Juckes said that the appetite for risk assets to deliver good returns remains strong, even as expected United States rate rises capture the focus of global investors.

BI's Governor Agus Martowardojo reiterated on Monday that the central bank would be ready to stabilise the rupiah if it becomes volatile following the anticipated US rate hike.

Analyst Robert Halver with Baader Bank said: "With the economy improving a rate increase is doable, but what's much more important is what comes next".

That can be seen in a comparison of monthly job numbers - U.S. job growth has averaged more than 186,000 per month since January 2010, but in December through February, that jumped to 209,000, well above the 100,000 a month needed to mop up growth in the working age population.

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