BSS/AFP :
Asian markets rallied Friday following a healthy performance on Wall Street, with investors largely pricing in more interest rate hikes aimed at taming runaway inflation.
The more confident mood was reflected in a dip in the dollar, which has surged in recent weeks to multi-decade highs against its major peers owing to the Federal Reserve’s hawkish tilt to tighter monetary policy.
The greenback’s softness came even after Fed chief Jerome Powell reasserted the bank’s determination to keep hiking rates to fight prices, even at the cost of economic growth.
His warning that “we need to act now forthrightly, strongly” followed comments from his deputy Lael Brainard, who said policymakers would lift borrowing costs for as long as it takes to bring inflation down from 40-year highs.
Still, Wall Street ended in positive territory, putting markets on course for a weekly gain and easing some pressure after hefty losses in August caused by worries that rising rates will spark a recession.
“The markets have finally digested the fact that rates are almost certain to go up by 75 basis points when the Fed moves next (on September 21),” JoAnne Feeney, at Advisors Capital Management, told Bloomberg TV.
“What we are seeing though is some recognition that perhaps the sell-off that we saw in the second half of August was a bit overdone,” she said.
New York’s rise filtered through to Asia, where Hong Kong added more than two percent heading into a long weekend, while Tokyo, Sydney, Shanghai, Singapore, Wellington, Manila and Bangkok were all up.
OANDA’s Edward Moya said traders cheered as “Powell stuck to his hawkish script and affirmed the commitment to tighten policy until inflation is back towards their target.
“Wall Street is expecting to see some pricing pressure relief with next week’s inflation report, but that shouldn’t derail the current 75 basis-point pace of tightening.”
There was also some cheer from news that inflation in China had eased slightly in August, giving the government more room to introduce more economy-supporting measures, though the recovery remains hostage to leaders’ strict zero-Covid strategy of growth-sapping lockdowns.
