Asian shares lower, dollar up after Fed's latest statement
Asian shares were mostly lower while the dollar strengthened Thursday after the Fed said it would start trimming its bond holdings and planned one more interest rate increase this year.
KEEPING SCORE: Japan’s benchmark Nikkei 225 added 0.3 per cent to 20,377.35 as the yen weakened against the dollar, benefiting shares of exporters. But other regional indexes wavered, with South Korea’s Kospi slipping 0.1 per cent to 2,410.94. Hong Kong’s Hang Seng index slipped 0.1 per cent to 28,094.31 and the Shanghai Composite in mainland China flat at 3,365.73. Australia’s S&P/ASX 200 fell 0.9 per cent to 5,660.50. Taiwan’s benchmark rose and Southeast Asian indexes were mixed.
FED IN FOCUS: At their latest meeting, Federal Reserve policymakers kept short-term interest rates unchanged but said they still expect one more increase this year and three in 2018, if persistently low inflation rebounds. Since December 2015, the Fed has modestly raised the rate four times. Rates had previously been cut to a record low after the 2008 financial crisis, helping to fuel a multiyear global stock boom. Officials also said they plan to start unwinding the at the U.S. central bank’s $4.5 trillion balance sheet next month by reducing its bond holdings, which will gradually increase long-term borrowing rates. The plans were mostly in line with economist expectations.
INVESTOR INSIGHT: “The Fed’s seemingly hawkish views on sustained lift-off in U.S. interest rates may be seen as a form of pressure for regional equities and could dampen prices today,” said Jingyi Pan, market strategist at IG in Singapore. “Early movers in the region have so far been seen with mixed movements, mostly in red.”
JAPAN POLICY: Officials at Japan’s central bank, meanwhile, made no changes to monetary policy, leaving in place stimulus measures to prop up Asia’s No. 2 economy. The decision, which was widely expected, was approved in an 8-1 vote, with one new board member unexpectedly dissenting, saying the measures weren’t aggressive enough.
WALL STREET: Major U.S. benchmarks finished mostly higher. The Standard & Poor’s 500 index inched up 0.1 per cent to 2,508.24 and the Dow Jones industrial average rose 0.2 per cent to 22,412.59. The Nasdaq composite lost 0.1 per cent to 6,456.04.
CURRENCIES: The dollar rallied against its peers after the Fed statement, rising to a nearly two-month high of 112.46 yen from 112.23 yen on Wednesday. The euro weakened to $1.1884 from $1.1892.
ENERGY: Oil futures snapped their rally. Benchmark U.S. crude dipped 6 cents to $50.63 a barrel added in electronic trading on the New York Mercantile Exchange. The contract rose 93 cents, or 1.9 per cent, to settle at $50.41 a barrel on Wednesday. Brent crude, used to price international oils, lost 12 cents to $56.17 a barrel in London.