Asian shares mixed after Fed decision

Asian shares mixed after Fed decision

HONG KONG - Asian markets were mixed Thursday while the dollar rallied after the Federal Reserve stuck to its timetable on hiking interest rates but indicated they could rise more sharply than initially envisaged.

The central bank's statement that its federal funds rate would remain low for "some considerable time" fanned a rally on Wall Street, with the Dow ending at a record high.

Tokyo surged 1.01 per cent by the break thanks to the weaker yen, but Sony plunged almost 10 per cent after warning of another huge loss this financial year.

Hong Kong lost 0.69 per cent, Sydney fell 0.30 per cent, Seoul shed 0.57 per cent and Shanghai was up 0.37 per cent.

A rate increase could hurt Asian equities and currencies by making them vulnerable to a sell-off, as the incentive for investors to seek higher yields in regional markets is reduced.

After a closely watched meeting, the Fed said Wednesday it would stick to its steady-as-she-goes policy on interest rates, keeping them at a record low of 0-0.25 per cent despite growing calls for a rise as the economy strengthens.

Markets had been on the watch for a change in its language, which could have signalled a rate hike before the mid-2015 timeline currently in place.

Bank chief Janet Yellen continued with her line that there remains too much slack in the jobs market even as the US unemployment rate has fallen to 6.1 per cent.

"There is relatively little change in the assessment of the outlook by the participants in this meeting," she said at a news conference.

"There is significant under-utilisation of labour resources."

However, it did suggest that when rates eventually increase, they could end next year higher than initially estimated.

The prospect of six or more months of easy money was cheered by Wall Street. The Dow rose 0.15 per cent to a new record, the S&P 500 gained 0.13 per cent to end just short of its own all-time high and the Nasdaq edged up 0.21 per cent.

And the likelihood of higher interest rates down the line also boosted the dollar. In early Asian trade the greenback bought 108.52 yen, its highest level since September 2008, against 108.29 yen in New York.

The euro bought $1.2853 and 139.51 yen against US$1.2865 and 139.32 yen.

The news also sent the dollar up against emerging market currencies, with Indonesia's rupiah, Korea's won, and the Singapore dollar and Taiwan dollar all suffering.

The British pound was also in focus on the day Scotland holds its independence referendum. While the vote is still too close to call, there are fears that a vote to break away from the United Kingdom will slash around 10 per cent off sterling and hammer the economy.

In morning exchanges the pound was sitting at US$1.6227, compared with $1.6280 in New York.

On oil markets US benchmark West Texas Intermediate for October delivery fell 48 cents to $93.94 while Brent crude for November eased 44 cents to US$98.53.

Gold was at US$1,223.59 an ounce, against $1,237.41 an ounce late Wednesday.

 

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