Trades lower ahead of Fed rate decision, PBOC’s status-quo

• Asian equities trade in negative territory amid the cautious tone.
• People’s Bank of China (PBoC) held benchmark lending rates unchanged on Wednesday.
• Japan’s top currency diplomat said the government is handling FX fluctuations with a high sense of urgency.
• Investors await the Fed meeting with expected no change to rates.

Asian stock markets trade lower on Wednesday as investors await the highly-anticipated Federal Reserve interest rate meeting.

At press time, China’s Shanghai is down 0.36% to 3,113, the Shenzhen Component Index declines 0.32% to 10,093, Hong Kong’s Hang Sang falls 0.47% to 17,912, South Korea’s Kospi drops 0.29% and Japan’s Nikkei falls 0.54%.

In China, the People’s Bank of China (PBoC) maintained benchmark lending rates steady on Wednesday, as expected by the market. The one-year Loan Prime Rate (LPR), was kept at 3.45%, while the five-year LPR was unchanged at 4.20%.

Following the PBOC meeting, a Chinese central bank official said that the Chinese central bank would pay more attention to movements in the Yuan exchange rate versus a basket of currencies. The official added that China’s monetary policy has considerable capacity to adapt to unforeseen challenges and changes.

US Treasury Secretary Janet Yellen said on Tuesday that she thought the Chinese government would most likely use the policy space they have to try to avoid a slowdown with major proportions while mentioning the spillovers from China’s economic difficulties to the US.

In Japan, Masato Kanda, Japan’s top currency diplomat, issued a verbal intervention on Wednesday. Kanda stated that the Japanese government is handling FX fluctuations with a high sense of urgency. 

Additionally, Japan’s Balance of Trade for August came in at ¥-930.5B, worse than the expectation of ¥-659.1B. Meanwhile, Exports came in at -0.8% YoY versus -0.3% prior, better than expected at -1.7%. Imports improved to -17.8% from -13.6%, beating the estimation of -19.4%.

Moving on, market players will closely watch the Fed meeting on Wednesday in the North American session. The attention will shift to the Bank of Japan (BoJ) interest rate decision on Friday. The BOJ is largely anticipated to maintain its short-term interest rate target of -0.1% and its 10-year bond yield target of around 0%.