Article by ForexTime
Asian markets had a strong start but soon lost momentum in the wake of the latest policy statement from the Federal Reserve, which left the door open to a rate rise by the end of this year.
Wall Street stocks and the US dollar jumped higher on Wednesday after the Federal Reserve’s dropped previous warnings about the risks global financial and economic developments posed to the US economy. Trimming gains from earlier in the session, Japan’s Nikkei was down 0.1 per cent in mid-morning trade, while Australia’s S&P/ASX 200 was down 0.5 per cent. China’s Shanghai Composite was up 0.4 per cent, while Hong Kong’s Hang Seng was flat.
Wednesday’s FOMC statement has put the possibility of a December rate hike back on the table. If US economic data remains solid and the global backdrop doesn’t deteriorate then this will likely provide the FOMC policymakers with sufficient confidence to hike rates in December.
The S&P 500 closed 1.2 per cent higher, while the Dow Jones Industrial Average added 1.1 per cent and the Nasdaq Composite rose 1.3 per cent. The prospect of tighter monetary policy saw the dollar index, a measure of the US currency against a basket of global peers, rise by 0.9 per cent on Wednesday, but the buck was giving some of that back on Thursday morning, declining 0.1 per cent to 97.645.
The stronger US dollar also saw gold drop by 0.9 per cent on Wednesday, but recovered 0.5 per cent to $1,161.74 an ounce this morning.
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Another major central bank meeting was held after the Fed. The Reserve Bank of New Zealand issued a dovish statement but opted to leave benchmark interest rates unchanged at 2.75 per cent. The kiwi dollar has fallen 0.7 per cent since the decision to NZ$0.6672.
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