* Shares extend losses as markets brace for Fed minutes
* Indian rupee hits record low, Indonesian rupiah slides
* Dollar recovers from 6-month low vs euro
* Tokyo stocks recoup losses, Japan raises radiation alert
By Richard Hubbard
LONDON, Aug 21 World shares hovered near
six-week lows on Wednesday and vulnerable emerging market
currencies extended losses as investors looked to a U.S. Federal
Reserve report expected to signal a cutback in its stimulus
Wall Street was set to open slightly lower as well with
investors highly cautious about trading ahead of the release of
the minutes of the Fed's July meeting, due at 1800 GMT.
Markets have been grappling with the prospect of an early
end to the Fed's ultra-loose monetary policy ever since chairman
Ben Bernanke said in June that the central bank expected to
taper its monthly $85 billion bond buying programme this year.
A widely held conviction that Wednesday's minutes will hint
at a policy shift next month continued to hit the Indian rupee,
Indonesian rupiah and Turkish lira - despite supportive words
and actions from the countries' central banks.
"I don't think we're going to get that clear signal as to
whether September is when they pull the trigger on tapering, but
that is what the markets are hoping for," said Daragh Maher, FX
strategist at HSBC.
The rupee fell to a record low of 64.52 per dollar,
the rupiah looked set to break the key 11,000 per dollar level
and the lira plumbed an all-time low, drawing no
support from a rate hike on Tuesday.
Large current account deficits make all three countries
particularly vulnerable to capital outflows at times of monetary
Equities have also been caught up in the emerging markets'
selloff, victims of a growing conviction among investors that an
end to Fed bond buying due to the stronger U.S. economic outlook
makes developed debt and stock markets a sounder bet.
MSCI's emerging equity index fell 0.5 percent to a six-week
low, having lost more than 2 percent this month,
though it remains above the June lows set when the Fed first
announced the likelihood of a policy shift.
The MSCI world equity index, which tracks
developed and emerging markets, was down around 0.25 percent to
levels last seen in early July.
Europe's broad FTSE Eurofirst 300 index and
Britain's benchmark equity index both tracked the falls
in global equity markets lower.
However, in Japan the Nikkei ended up 0.2 percent as
investors drew support from a declaration by Bank of Japan
Governor Haruhiko Kuroda that he would not hesitate to expand
the bank's massive asset-buying campaign if the economic outlook
That gain came despite plans by Japan's government to raise
the severity of the latest leak at Fukushima to a level 3 event,
or a serious radiation incident, a move which sent shivers
through Asian markets and drew a shocked reaction from China.
Among the major currencies - where safe-haven flows ahead of
the Fed minutes have favoured the yen and Swiss franc - the
dollar had recovered some lost ground, gaining 0.2 percent
against a basket of currencies to be off a two-month low.
The euro eased 0.2 percent against the dollar to $1.3390
, having touched a six-month high of $1.3452 on Tuesday,
and sterling hit a two-month high of $1.5697 against the
dollar when a business survey showed an improvement in UK
Developed world fixed income markets were trapped in narrow
ranges, while emerging market bonds reflected the weakness in
their underlying currencies. Turkish 10-year bonds were trading
at 9.3 percent up from 6.0 percent three months ago before the
tapering talk began.
Benchmark 10-year Treasury yields edged back to 2.82 percent
though rates remained close to 2013 highs as many
investors have already positioned for the potential Fed
German bond yields were also little changed, having hit
their highest since March 2012 on Monday.
"We do not expect much new guidance from the minutes so the
risk is that we see a bit lower yields in U.S. Treasuries and
Bunds," said DZ Bank strategist Christian Lenk.
Commodity markets were generally softer. Copper futures
dipped 0.6 percent to $7,376 a tonne, while spot gold
fell 0.4 percent to around $1,365 an ounce, still not far
from a two-month high set on Monday.
Brent crude prices eased 45 cents to $109.70 a
barrel, while U.S. oil for October delivery lost 55 cents