HONG KONG – Most Asia markets rose on Thursday and the dollar extended losses after the Federal Reserve stuck to its target for interest rate hikes this year, soothing concerns it would embark on a quicker pace.
After one of the most anticipated meetings in recent months, the central bank lifted borrowing costs as expected to a decade high but indicated just 2 more over the rest of the year, confounding forecasts of 3 more.
Jerome Powell, in his first news conference since taking the helm, said the move was in response to a strong economic outlook that had been helped by December’s tax cuts, while improving jobs creation was lifting incomes and confidence.
In response, the dollar sank against most other units in New York and while the Fed also said it saw a more aggressive path of hikes over the next two years as the economy continues to strengthen the US unit failed to bounce back. It extended the losses in Asia, with talk of a monetary tightening trend in Europe and Japan adding to its weakness.
“The statement would suggest it’s open season on the dollar and greenlights sellers to re-engage as the Fed failed to confirm any of the markets hawkish suspicions,” said Stephen Innes, head of Asia-Pacific trading at OANDA.
The Fed rate hike was followed by Hong Kong’s de facto central bank as the 2 are linked via a currency peg.
The dovish short-term outlook for US borrowing costs provided optimism for Asian investors, with Tokyo ending the morning 0.4 percent higher, Hong Kong adding 0.3 percent and Seoul 0.7 percent higher.
Singapore was slightly higher, while Taipei, Manila and Jakarta also climbed.
But Shanghai and Sydney slipped.
CHINA SANCTIONS WARNING
“The (policy committee’s) economic and policy rate forecast seeks to strike a balance between showing the need for more rate hikes in the long term but not rocking market sentiment too much with the median for 2018 staying at three hikes,” said Tai Hui, chief market strategist for Asia Pacific at JP Morgan Asset Management.
While markets are predominantly higher, trading floors remain edgy on fresh trade war fears after it emerged Donald Trump is expected to announce sanctions on China over what the US calls its “theft” of US intellectual property.
The move would further strain tensions with Beijing after the White House unveiled controversial tariffs on imports of steel and aluminium, which sparked fury from world leaders.
On oil markets both main contracts extended Wednesday’s surge following an official report showing US stockpiles fell last week, confirming an industry group’s figures and indicating a pick-up in demand.
Adding to the buying sentiment are brewing geopolitical tensions with speculation about Trump tearing up the Iran nuclear deal mixed with a drop in supplies from crisis-hit Venezuela.
An upbeat assessment on the supply-demand outlook from the Russia-OPEC group that has capped output also provided hopes for further price hikes.
KEY FIGURES AROUND 0230 GMT (10:30 a.m. Thursday in Manila)
Manila – PSEi: UP 0.88 percent at 7,978.49
Tokyo – Nikkei 225: UP 0.4 percent at 21461.49 (break)
Hong Kong – Hang Seng: UP 0.3 percent at 31,491.80
Euro/dollar: UP at $ 1.2365 from $ 1.2343 at 2100 GMT
Pound/dollar: UP at $ 1.4168 from $ 1.4148
Dollar/yen: DOWN at 105.64 yen from 105.95 yen
Oil – West Texas Intermediate: UP 17 cents at $ 65.34 per barrel
Oil – Brent North Sea: UP 13 cents at $ 69.60 per barrel
New York – Dow: DOWN 0.2 percent at 24,682.31 (close)
London – FTSE 100: DOWN 0.3 percent at 7,038.97 (close)
© Agence France-Presse