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The dollar rose to its highest level in more than two years and global stocks fell on Thursday after the US Federal Reserve rattled markets when it signaled a slowdown in the pace of interest rate cuts next year.
Asian currencies, including the Chinese renminbi and the Japanese yen, fell sharply against the dollar, with the South Korean won falling to its lowest level in 15 years. The region's major stock indexes opened lower after a sharp decline in Wall Street stocks the previous day.
Futures indicated that Europe was set to follow Asia and the United States lower, with contracts tracking the FTSE 100 index down more than 1.1 percent, and contracts for the Euro Stoxx 50 index down 1.6 percent.
The moves come after the Federal Reserve cut interest rates by a quarter of a percentage point on Wednesday, but gave forecasts indicating smaller rate cuts than previously forecast for 2025, highlighting concern that the crisis will continue. Economic inflation.
The indication of that US interest rates That interest rates would have remained high for longer, sucking capital away from other markets, would have been a blow to Asian and emerging markets, where investors had hoped for a quick path back to lower interest rates.
“Markets were surprised by the Fed’s hawkish stance,” said Mitul Kotecha, head of emerging markets macro strategy at Barclays Bank in Singapore. “For Asia, which has struggled with relatively low yields and a weaker China adding pressure to the region, (today’s declines) are the culmination of those factors.”
The dollar, which jumped 1 percent against a basket of currencies including the yen and the British pound on Wednesday, rose 0.1 percent on Thursday.
The yield on the 10-year Treasury note rose another 0.03 percentage point to 4.52 percent. The interest rate-sensitive two-year bond yield settled at 4.35 percent after rising 0.11 percentage points on Wednesday.
The Indian rupee hit an all-time low of 85.1 rupees to the dollar, while the Chinese renminbi oscillated around 7.3 yuan.
Stocks in the Asia-Pacific region fell on Thursday, with Australia's S&P/ASX 200 down 1.7 per cent, South Korea's Kospi down 1.9 per cent and India's Sensex down 1.2 per cent.
Hong Kong's Hang Seng Index fell 0.3 percent, while mainland Chinese-listed stocks recovered after opening lower.
Japan's currency-sensitive Nikkei 225 index fell 0.6 percent after the Bank of Japan chose on Thursday to cut interest rates. Keep rates constant.
The US Federal Reserve's average “point” now suggests that policymakers only expect two quarter-point rate cuts in 2025, down from four forecast in September.
“Given the risk of a resurgence in inflation due to potential trade tariffs and a migration slowdown that eases pressure in the labor market, market expectations of just two additional cuts in 2025 now look reasonable,” wrote Jean Boivin, head of the BlackRock Investment Institute. , in a note.
