Asian Markets Extend Losses, Yen and Yuan Under Pressure After Fed Rate Action and Views

Arjun Pandit
21 Sep, 2023
Mumbai

Market indexes across Asia turned lower after the U.S. Federal Reserve decided to hold rates for the second time in a row. 

The rate was widely anticipated by investor, but the Fed's forecast of future rate hikes and levels got market worried. 

Fed policymakers held out for a one possible rate hike before the year's end and fewer rate cuts in 2024. 

Policymakers also estimated that the U.S. economy is likely to avoid a recession in 2023 and 2024. 

In the latest estimate, the Fed forecasted the economy to grow at 2.1% in 2023 from the previous estimate of 1% and continue its growth in 2024 at 1.5% compared to 1.0% estimate released in June. 

Market sentiment was weak in Tokyo after the Fed's hawkish stance and the yen declined to 148.35 against the U.S. dollar. 

Long-term Japanese government bond rates increased to a 10-year high of 0.745%.

Investors in Tokyo are also awaiting the Bank of Japan's rate decision on Friday and most market participants are looking forward to the central bank's views on inflation and future rate path. 

In Thursday's trading, the Nikkei index decreased 1.3% to 32,605.45 and tech stocks led decliners for the fourth day in a row on the worries of higher global rates. 

The Hong Kong Monetary Authority left its base rate unchanged at 5.75%, following the rate pause in the U.S. 

The yuan edged down and hovered near its 16-year low to 7.31 against the U.S. dollar on the worries of higher rates in the U.S.

In China trading, the Shanghai SSE Composite index inched down 0.3% to 3,090.31 and the Hang Seng index decreased 1.3% to 17,651.44 and the KOSPI index fell 1.7% 2,516.74, 

The Hang Seng index extended weekly losses to 2.9% and September losses to 4%, after tech stocks and property developers led decliners.