* Fed may buy few hundred bln dollars of Treasures-WSJ
* WSJ article adds to doubts on "big bang" QE2, lifts
dollar
* Australian dollar drops on subdued CPI
By David Fox
HONG KONG, Oct 27 (Reuters) - The U.S. dollar edged up on
Wednesday on doubts the Federal Reserve will aggressively buy
assets to pump more money into the system, while commodity
stocks led Asian stocks lower.
Most currency dealers expect the Fed to opt for more
quantitative easing at a policy meeting next week-- essentially
printing money to buy assets and pull market rates lower -- but
some believe the weakening dollar already reflects those
expectations, and the question of how much easing, and how
fast, has kept investors edgy.
The Wall Street Journal said on Wednesday the Federal
Reserve would probably unveil a programme of U.S. Treasury bond
purchases worth "a few hundred billion dollars", but gave no
source for the report. []
(For a preview of the Fed meeting with possible outcomes,
see [])
The euro was down 0.23 percent on the day at $1.3826 <EUR=>
after touching $1.3858 overnight, while the dollar was up 0.2
percent at 81.58 yen <JPY=>. The dollar index, a measure of its
performance against a basket of currencies, was up 0.07 percent
<=USD>.
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For more on the G20 meeting, click
[]
Will Japan intervene again? click
[]
G20's truce on currencies
http://r.reuters.com/nan99p
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The Fed meets on Nov. 2-3, but some investors have begun to
reconsider the likelihood of a big burst of QE after comments
from various members of the central bank.
The U.S. currency rose broadly on Tuesday as investors
speculated the Federal Reserve would proceed more cautiously in
announcing any asset-buying, scaling back bets against the
greenback.
"I think it's still possible that QE II is not a done deal
for November, even though the market has been trading as if it
is," said Brian Dolan, chief currency strategist at Forex.com.
AUSSIE CPI SURPRISE
New data from Australia showed consumer prices there rose
by less than expected in the last quarter while the annual pace
of core inflation was the slowest in five years -- greatly
lessening the urgency for a hike in interest rates next week.
The key trimmed mean measure of underlying inflation
favoured by analysts rose 0.6 percent in the quarter and 2.5
percent for the year, seemingly justifying the RBA's decision
to skip a rise in its 4.5 percent cash rate this month and give
it room to pause ahead of the U.S. Federal Reserve meeting.
The market now implies around a 29 percent chance of a hike
next week <CSRBA=CSAU> -- down from 60 percent earlier in the
day -- and just 37 basis points of tightening over the next 12
months compared to 57 basis points before the data.
ASIAN STOCKS FLAT TO LOWER
The MSCI index of Asia Pacific stocks outside Japan slipped
0.46 percent <.MIAPJ0000PUS> while the MSCI's emerging market
stock benchmark <.MSCIEF> was down 0.23 percent at 0130.
The rebounding dollar has caused some investors to bail
from commodity stocks, pulling down the MSCI Asia ex-Japan
commodity sector index 1.2 percent on the day.
U.S. stocks ended little changed before the potential
market tumult of next week's U.S. elections and likely
announcement of more stimulus from the Fed.
Next week's high-profile events could signal shifts in both
monetary policy and legislative direction, raising fears that
trumped Tuesday's earnings news and economic reports.
Overnight, the Dow Jones industrial average <> gained
0.05 percent, while the Standard & Poor's 500 Index <.SPX>
gained 0.02 point to 1,185.64. The Nasdaq Composite Index
<> gained or 0.26 percent.
The pan-European FTSEurofirst 300 <> index of top
shares closed down 0.2 percent, after rising 0.3 percent on
Monday to end near a six-month high.
Spot gold <XAU=> edged up 0.4 percent to $1,343.45 an
ounce, while U.S. gold futures <GCZ0> edged up $5 to $1,343.4
an ounce. Crude oil <CLc1> fell 0.23 percent to $82.32 per
barrel.
(Additional reporting by Wayne Cole in SYDNEY and Manuela
Badawy in NEW YORK and Charlotte Cooper in TOKYO; Editing by
Nick Macfie)
