The US dollar yesterday held gains against its major peers and rallied against most emerging currencies, but equities were broadly lower after the US Federal Reserve hinted at a possible December interest rate hike.
While the Fed provided an upbeat assessment of the US economy after its latest policy meeting, the news took the wind out of an advance across global markets this month, which had been supported by expectations a rate rise would be delayed.
Markets are also keeping tabs on Beijing, where investors hope the Chinese Communist Party will unveil fresh measures to support the stuttering Chinese economy after a four-day meeting draws to a close.
Photo: Reuters
Yesterday in Tokyo, the US dollar dipped to ¥120.77 following a forecast-busting rise in Japanese output, while the euro was at US$1.0940.
The single currency was also at ¥132.14 from ¥132.24 in US trade and well off the ¥132.98 earlier on Wednesday in Asia.
The South Korean won fell by more than 1 percent, while Indonesia’s rupiah sank 0.5 percent and the Malaysian ringgit slipped 0.2 percent.
The Fed on Wednesday kept interest rates at record lows, but expressed faith in the outlook for the world’s top economy, brushing over recent weak spots and focusing on what it called “solid” consumer spending and business investment.
Policymakers dropped a warning from last month that the muted global economy could affect the US, even as worries mount about slowing growth in China and falling commodity prices.
Data since last month “suggests that economic activity has been expanding at a moderate pace,” the statement said.
It then explicitly pointed to the possibility of a rate hike in its next meeting in December, dampening market predictions it could be held off until March.
“This is exactly what the market wanted,” Scott Wren, a senior global equity strategist in Saint Louis at Wells Fargo Investment Institute, told Bloomberg TV.
US dealers welcomed the Fed’s brighter outlook for the domestic economy, after a string of recent weak data had called its strength into question. On Wall Street on Wednesday, the Dow, S&P 500 and NASDAQ each chased up more than 1 percent.
Fears of a shutdown of the US economy were also soothed when the US House of Representatives late on Wednesday passed a bipartisan, two-year budget deal that boosts federal spending by US$80 billion and raises the debt ceiling.
However, Asian investors were less enthralled, with Seoul ending down 0.4 percent and Sydney losing 1.3 percent. Bourses in Indonesia, Thailand and the Philippines — where foreign investment is crucial — also tumbled, while Tokyo edged up 0.17 percent and Shanghai added 0.38 percent.
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