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Asia: Investors move cautiously as Fed decision approaches

[HONG KONG] Asian markets struggled on Wednesday ahead of a Federal Reserve policy decision, while geopolitical issues returned after Donald Trump threatened to "totally destroy" North Korea if it did not rein in its nuclear ambitions.

A third successive record on Wall Street, fanned by speculation about Trump's economic agenda, was not enough to entice buying in the region as equity dealers cash in recent gains.

Foreign exchanges were also seeing little movement before the US central bank's meeting concludes, with the dollar essentially flat, although the Mexican peso was down 0.3 per cent after a deadly earthquake killed scores in Mexico.

Stephen Innes, head of Asia-Pacific trading at Oanda, said: "Markets have reached a crossroad and dealers are sitting tight ahead of (the Federal Open Market Committee meeting). It seems like a typical pre FOMC week with low currency volatility." While policymakers are not expected to raise interest rates, the post-meeting statement and comments from Chair Janet Yellen are the main focus as traders hope for a timetable on winding down its crisis-era bond-buying stimulus.

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"The market doesn't expect anything earth-shattering from the meeting but there are risks on both sides," Greg McKenna, chief market strategist at AxiTrader, said in a commentary.

In equity trade, Tokyo ended the morning session flat after surging two percent on Tuesday, while Shanghai slipped 0.1 per cent and Sydney shed 0.3 per cent while Singapore and Seoul were each down 0.1 per cent.

However, Hong Kong edged up 0.2 per cent.

The US-North Korea stand-off was thrown back into focus by Trump on Tuesday when he warned Pyongyang over its nuclear programme in his maiden UN General Assembly speech.

The president said he would wipe out the North if it threatened the US or its allies and warned Kim Jong-Un was "on a suicide mission for himself and for his regime".

"The United States is ready, willing and able, but hopefully this will not be necessary," he said.

Mr McKenna said "we all need to keep a weather eye on North Korea", although he added that the tycoon was "much more conciliatory" to the United Nations than he had been in the past.

AFP

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