Thursday, March 28, 2024 | Ramadan 17, 1445 H
broken clouds
weather
OMAN
23°C / 23°C
EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

Asia stocks, currencies wobble as Fed flags more hikes

868875
868875
minus
plus

SYDNEY/TOKYO: Asian shares and currencies softened on Thursday after the Federal Reserve raised rates for the first time in a year and hinted at the risk of a faster pace of tightening than investors were positioned for.


Yields on short-term US debt surged to the highest since 2009, sending the dollar to peaks not seen in almost 14 years, which in turn prompted China’s central bank to set the yuan at its weakest level against the greenback since 2008.


The 10-year US Treasuries yields rose to 2.587 per cent, having risen more than 0.7 percentage point since Trump was elected as the next US President.


Yields on two-year Treasury paper jumped more than 10 basis points to 1.28 per cent, the biggest daily increase since early 2015 and the highest level since August 2009. They stood at 1.267 per cent in Asia.


EMERGING PRESSURE: It also took the premium that US Treasuries pay over German two-year debt to its fattest since 2000.


The allure of higher US yields raises risks for emerging markets in Asia and elsewhere, as funds look to take advantage of rising US rates.


The Chinese central bank set the yuan mid-point at 6.9289 to the dollar, its weakest since June 2008, though market players noted that the yuan has been firmer against many other currencies and rose on trade-weighted basis.


The yuan promptly fell to its lowest levels in more than eight years, reflecting the weakening in the daily mid-point.


Low-yielding currencies such as the Singapore dollar and Korean won came under pressure, and analysts anticipate the low-yielders will be on the back foot in an environment of a rising dollar, higher US yields and a depreciating yuan. The challenges confronting Asia’s policymakers from capital outflows was highlighted in Thursday’s South Korean central bank meeting.


The Singapore dollar fell near its January low and is on the verge of slipping to its lowest September 2009.


Even high-yielding currencies in Asia could return some of their recent gains if investors shy away from risk, Citi analysts said in a note.


The US dollar was already up across the board, hitting a near 14-year peak against a basket of currencies at 102.62 .


The euro dropped to as low as $1.0468. A break below its March 2015 low of $1.0457 could open the way for a test of $1, or parity against the dollar, which last happened in late 2002.


The dollar rose to 117.86 yen, its highest level since early February, though that drop in the yen cushioned Japanese stocks, lifting Nikkei 0.1 per cent.


MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 1.2 per cent.


European shares are expected to be open slightly weaker, with spread-betters looking to a fall of 0.2 per cent in Britain’s FTSE and a 0.1 per cent drop in Germany’s DAX .


Wall Street suffered its biggest percentage decline since before the November 8 US presidential election, though the loss was slight compared with gains of the last month or so.


The Dow ended on Wednesday down 0.6 per cent, while the S&P 500 lost 0.81 per cent and the Nasdaq 0.5 per cent.


Stocks have been on a tear in recent weeks on speculation the incoming Trump Administration will pursue tax cuts and increase infrastructure spending. Oil prices stabilised as a tighter market looms in 2017 due to planned output cuts led by Opec and Russia, after sharp declines earlier following the Fed’s action.


Brent crude futures traded at $53.89 per barrel, erasing gains made earlier in the week that had taken it a 1 1/2-year high. — Reuters


SHARE ARTICLE
arrow up
home icon