Hawkish Fed seen as bad news for Asia stock and currency bulls

 Hawkish Fed seen as bad news for Asia stock and currency bulls

Jerome Powell fell sharply in US stocks on Wednesday and analysts expected more for Asia on Thursday. Higher long-term US interest rates could affect growth in the region, weighing on stocks and putting further pressure on currencies to strengthen the dollar.

Jerome Powell fell sharply in US stocks on Wednesday and analysts expected more for Asia on Thursday. Higher long-term US interest rates could affect growth in the region, weighing on stocks and putting further pressure on currencies to strengthen the dollar.

Here's a selection of comments from analysts and strategists:

lower asia development

The Fed hike could be followed by similar hikes by Asian central banks, which would result in an increase in dollar funding costs and increased local borrowing costs in Asian markets, according to Chandan Kumar GV, head of products at Index. As per, a global indexing solution provider for ETFs. Financial conditions across Asia are expected to tighten resulting in an overall slowdown of economic growth.

Asian currencies are likely to fall further against the US dollar as inflation data around the world prompts investors to seek safe havens after concerns about central banks raising interest rates even at the expense of growth. Chances of continuing increase.

self defeating rallies

“Any equity or junk bond rally on the pre-emptive pivot still to the upside, given such risks, would mechanically undermine financial conditions, which we have seen fueling long-term inflation expectations. , from which it itself has been made. – Defeat in the medium term,” said Chamath de Silva, a senior portfolio manager at Sydney-based BetaShares Holdings.


There is now a risk that the dollar will peak in 2023, which will "delay the start of recovery in the Australian, kiwi, euro and pound," said Kim Mundy, a senior currency strategist at the Commonwealth Bank of Australia.

China optimism

Asian markets may get some spillover effect from Wall Street, however, resilient moves can be expected as the Fed's decision was widely expected, according to Tina Teng, an analyst at CMC Markets. A two-day rally in Chinese stock markets could also offer optimism, amid broad bets on Beijing's exit from the COVID-zero policy.

Australian Appraisal

Scott Rundell, Chief Investment Officer at Mutual Ltd., said Australian stocks are down about 8.6% from the peak of the pandemic, with inflation heading towards 8%, with growth slowing and home prices likely to fall 20%. "If I had woken up from a coma today and someone gave me those figures, I sure would expect the ASX 200 to be much lower than it is currently."