TOKYO
(Reuters) - Asian shares gained on Wednesday after Wall Street managed to
weather a fresh twist in the controversy over U.S. President Donald Trump's
alleged
connection with Russia, while investors looked ahead to Federal Reserve
Chair Janet Yellen's comments.
MSCI's
broadest index of Asia-Pacific shares outside Japan ticked up 0.3 percent.
Japan's yen-sensitive Nikkei slid 0.4 percent on the yen's gains but MSCI's
dollar-denominated Japan index gained 0.5 percent.
European
shares are expected to rise, with spread-betters looking to gains of 0.3
percent in Germany's DAX and Britain's FTSE, and a 0.2 percent rise in France's
CAC at the opening.
U.S. stocks
took a brief tumble after emails disclosed Trump's eldest son welcomed help
from a Russian lawyer for his father's 2016 election campaign against Hillary
Clinton.
But by the
closing bell, Wall Street shares had clawed back their losses.
"The
e-mails look pretty bad but then again they don't look like decisive evidence
(for illegal behavior) either. I doubt this alone would lead to a risk-off
market," said Hiroko Iwaki, senior fixed income strategist at Mizuho
Securities.
U.S. shares
were helped in part as the Senate announced a two-week delay to its August
recess to allow more time to tackle a measure that would repeal key parts of
Obamacare, as well as pursue other legislative priorities.
Still, it
remained unclear whether U.S. Senate Republicans have the votes to pass the
measure or even what form it would finally take.
On the other
hand, the dollar failed to recover after the damage suffered from the new twist
in the Trump campaign's alleged links with Russia.
The euro
vaulted to a 14-month high of $1.14895 in Asian trade.
The dollar
also lost steam against the yen, which had been under renewed pressure
following Friday's bond-buying by the Bank of Japan which highlighted divergent
monetary polices between the two countries.
The U.S.
currency dropped 0.4 percent to 113.46 yen, slipping from a four-month high of
114.495 yen touched on Tuesday.
The Canadian
dollar stood at C$1.2907 per dollar, near Friday's 10-month peak of C$1.2860 as
investors brace for a likely rate hike by the Bank of Canada, its first
tightening since 2010, later in the day.
The move
would make Canada the first to follow the U.S. Federal Reserve in removing the
monetary stimulus poured into the global economy, with the European Central
Bank and the Bank of England also seen moving in that direction in coming
months.
The dollar's
index against a basket of six major currencies was hovering at 95.58, just
above its nine-month low of 95.47 plumbed at the end of June.
U.S.
Treasuries yields stayed below their recent peaks, with the 10-year yield at
2.352 percent, compared with 2.398 percent marked on Friday, its loftiest level
in almost two months.
Ahead of Fed
Chair Yellen's testimony to Congress on the state of the U.S. economy from 1400
GMT, two of her colleagues cited low wage growth and muted inflation as reasons
for caution on further interest rate increases.
Fed Governor
Lael Brainard embraced the plan to reduce the balance sheet "soon,"
but suggested her support for any future rate increases will depend in part on
how inflation shapes up.
Minneapolis
Federal Reserve Bank President Neel Kashkari said he finds it hard to believe
that the U.S. economy is in danger of overheating when wage growth is so low.
Traders
trimmed expectations of a rate hike by the end of the year, with dollar
interest rate futures pricing in about a 55 percent chance compared to about 60
percent earlier, while most investors expect the Fed to decide to start
shrinking its balance sheet in September.
"Yellen
has indicated after the June policy meeting, in the clearest way as possible by
her standards, that she plans to start balance sheet reduction and there will
be one more rate hike this year. Since then, there's been no big changes in the
economy," said Tomoaki Shishido, senior market economist at Nomura
Securities.
"I
would think the U.S. CPI data on Friday could be more important. If the Fed's
assessment that the softness in CPI between February and May is transitory, the
Fed will go ahead with its plan. If that's not the case, some Fed policymakers
will want to revise that plan," he added.
Reaction was
largely muted to a story by Politico that Trump is increasingly unlikely to
nominate Yellen next year for a second term, and National Economic Council
Director Gary Cohn is the leading candidate to succeed her.
Oil prices
extended gains from the previous day as the U.S. government cut its crude
production outlook for next year and as fuel inventories plunged.
U.S. crude
futures rose 1.8 percent to $45.83 per barrel, extending their recovery from
Monday's near two-week low of $43.65. Brent futures gained 1.5 percent to
$48.25 per barrel.
Both contracts
have risen above their 50 percent retracement of their fall between mid-last
week and Monday.
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