Traders position for possible relief rally

AFTER falling 47 points since the start of the week, the Straits Times Index on Wednesday bounced 26.8 points to 2,868.74 in line with an overnight rally on Wall Street that probably also helped Hong Kong and China stocks to a sharp Wednesday rebound.

Observers said the gains were most likely because of traders positioning themselves for a probable "relief rally" that should occur if the US Federal Reserve refrains from raising its short-term rate at its Thursday Federal Open Market Committee (FOMC) meeting.

Based on latest prices in the federal funds futures market, the probability of a rate hike this week is 32 per cent. The probability that the Fed will postpone the first hike to December is currently 62 per cent.