By Chao Deng
Most stock markets in Asia Pacific fell Wednesday as investors braced for an update on monetary policy from the U.S. Federal Reserve.
Australia’s S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO -1.63% was off 0.6% while both the Shanghai Composite /zigman2/quotes/210598127/delayed CN:SHCOMP +0.22% and Japan’s Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -0.18% fell by 0.4%. The Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -0.74% finished down 0.2% and South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 +0.05% lost 0.2%.
The Aussie dollar /zigman2/quotes/210561961/realtime/sampled USDAUD -0.3902% slid on expectations that the country’s central bank will cut interest rates at its meeting on May 3. The local currency was last off 1.7% against the U.S. dollar compared with earlier in the Asian trading day.
For most of the region however, investors awaited a monetary-policy update from the U.S. Federal Reserve’s Federal Open Market Committee, due later Wednesday. The central bank isn’t expected to raise interest rates but may hint about whether it will act in June.
The Fed’s announcement will be followed around midday Thursday by the Bank of Japan’s policy decision, though views are split on whether the BOJ will bolster its easing program.
“I suspect the Fed will not want to rock the apple cart,” and will keep a cap on upward momentum on the U.S. dollar, said Chris Weston, chief market strategist at brokerage IG.
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In Australia, shares were off for the third straight session amid heightened uncertainty over interest rates. The market opened modestly higher in the wake of an overnight recovery in oil prices, then built on gains to peak about midday following the release of data showing the first quarter of domestic deflation since the 2008.
That turned to selling as analysts reflected on the increased likelihood the Reserve Bank of Australia will cut interest rates next week, as it faces the risk that inflation will undershoot its 2%-3% target for a sustained period.
Commonwealth Bank of Australia /zigman2/quotes/200638713/delayed AU:CBA -3.01% led the big banks lower, falling 2.5%, while the National Australia Bank /zigman2/quotes/210431826/delayed AU:NAB -5.22% lost 2.2%. Among other banks, Westpac Banking /zigman2/quotes/203084975/delayed AU:WBC -6.36% shed 2% and the Australia & New Zealand Banking Group /zigman2/quotes/205482049/delayed AU:ANZ -4.54% fell 1.5%.
Meanwhile, stocks in Tokyo were dragged lower by disappointing earnings results.
Bicycle parts maker Shimano dropped 5.1% after the company cut its net-profit projection for 2016, citing a weaker U.S. dollar against the yen.
Electronics maker Canon Inc. /zigman2/quotes/207639533/delayed JP:7751 -3.90% lost 5.3% after the firm lowered its sales and profit projections for 2016. Canon cited pressures from slower economic growth in China and other emerging markets, as well as a higher yen.
—Robb M. Stewart and Kosaku Narioka contributed to this article.