Asian shares fall after Fed rate hike, tracking Wall St lead
Jun 21 2017
"The central bank said it would gradually ramp up the pace of its balance sheet reduction and anticipates the plan would feature halting reinvestments of ever-larger amounts of maturing securities".
Weighing on Treasury yields and bolstering bond prices, the tepid inflation numbers outweighed traders' concerns over the Fed's announced quarter-point rate hike and plans to reduce its balance sheet this year.
"They have taken a cautious approach to balance sheet normalisation, but they have begun it and it's definitely a tightening of policy", said ING strategist Martin van Vliet.
The top tier fell 48.6 points to 7425.8, a fall of 0.6%, as markets digested the latest rate rise by the US Federal Reserve, which marked the third in six months. Initially, the caps will be set at $6 billion per month for Treasuries and $4 billion per month of MBS. US employers continue to add jobs at a steady rate.
The WSJ Dollar Index was recently up 0.6% at 88.63, making dollar-denominated metals more expensive to other currency holders.
"With financial conditions remaining supportive. and U.S. financials breaking higher, the Fed may see little reason to moderate its rate hike projections when meeting today", strategists at Morgan Stanley said in a note to clients. This rate hike comes for the second straight time in 2017. It would start implementing those policies this year, assuming economic growth continues.
Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.958, 2.48 percent weaker than the midpoint.
While the hike was widely expected, some investors said the central bank's tone was more hawkish and that raised concern about the pace of US economic growth. When that was the time they dropped interest rates and bought up United States coffers and mortgage-backed securities to keep rates low.
The president wants $1 trillion worth of work on the ground and we expect to give it to him.
With GDP growth expected to remain above its long-term potential over the next few years, and the unemployment rate to remain below its long-run level, the Fed as a whole seems to be willing to look past what it sees as near-term economic noise.
Though the economy is growing only sluggishly and though inflation remains chronically below the Fed's two percent target, it foresees improvement in both measures over time.