Dollar surges, stocks tremble as Fed announces more gains

Dollar surges, stocks tremble as Fed announces more gains

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Written by Tom Westbrook

SYDNEY (Reuters) – The dollar rose to a two-decade high and Asian stocks hit a two-year low on Thursday after the Federal Reserve raised US interest rates sharply and expected them to raise them more and faster than investors had expected to tame. inflation.

Fed officials’ median forecast, which hit US interest rates at 4.4% by the end of the year and remains high in 2023, seemed to frighten even hawkish rates and currency markets and quickly quelled relief that Wednesday’s hike was no bigger.

The dollar against a basket of major currencies extended gains on Wednesday to hit a 20-year high of 111.72 during the Asian trading session. [FRX/]

The euro fell to a 20-year low of $0.9807 as Russia mobilized reserve forces for the war in Ukraine. The yen briefly hit a 24-year low when Japanese policy makers unanimously stuck to very easy settings, as expected.

Gold fell 1%. The pound sterling, the dollar, the yuan, and the yuan all hit their lowest levels. European futures were down 0.6% and European futures were down 2%.

“The Fed is not going to stop any time soon, and there will be an extended period of restrictive monetary policy for at least the next year or so,” said Sally Old, chief investment officer at GB Ware in Sydney.

β€œWhat else do you buy except for US dollars at the moment?” She added, citing growth clouds in Europe, Britain and China and a weak yen as Japan keeps interest rates low.

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MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.4% to its lowest level since May 2020. It fell 0.8% and touched a two-month low.

The US yield curve has deepened its inversion as investors priced in the opportunity of a “soft” economic downturn and their readiness for the damage to long-term growth.

The 2-year yield rose to 4.1320% in Asia while the 10-year yield was stable at 3.5416%. [US/]

“The chances of a soft landing will likely diminish to the point where policy needs to be more restrictive or restrictive for a longer period,” Fed Chairman Jerome Powell told reporters after the rate hike was announced.

rise ahead

Central bank meetings are scheduled for Taiwan, the Philippines, Indonesia, Switzerland, Britain and Norway later in the day, with increases expected everywhere.

Japan and China are the only major global values, with China cutting interest rates to support the faltering economy, and Japan waiting for wage growth before considering exiting a massive bond-buying project that is holding rates near zero.

The yen rose to a two-decade low of 145.50 per dollar in the wake of the Bank of Japan keeping policy steady, before rebounding slightly as traders worried about possible currency intervention.

Governor Haruhiko Kuroda’s views on the sharp decline in the yen will be closely watched when he speaks at 0630 GMT.

The Australian and New Zealand dollars were held at their lowest levels since mid-2020, with the Australian dollar down 0.7% on Thursday at $0.6586 and the New Zealand dollar 0.6% at $0.5816.

β€œBetween the escalating geopolitical risks to Ukraine and the hawkish Federal Reserve, the US dollar is absolutely rampant,” said currency strategist Alvin Tan at RBC Capital Markets in Singapore.

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In the commodity markets, oil compensated for its early losses as concerns about tight supplies with the approach of winter overshadowed fears of a global recession that caused the slide in the previous session.

Futures were up 50 cents, or 0.6%, at $90.33 a barrel by 0319 GMT. US West Texas Intermediate crude rose 45 cents to $83.39.[O/R]

Wheat stabilized after rising amid fears of a wider and deeper war in Ukraine. [GRA/]

The cryptocurrency has been consolidating near its recent lows, with the bitcoin price reaching $18,795.

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