Most markets boosted by Fed but United States dollar sinks

Asian traders moved cautiously Tuesday ahead of a much-anticipated Federal Reserve policy meeting, which they hope will provide clarity on the United States central bank's interest rate plans for the rest the year.

Japan's benchmark Nikkei 225 stock index lost 0.3 percent to 19,549.43 and South Korea's Kospi shed 0.3 percent to 2,128.12.

Fed fund futures FEDWATCH price in a more than 90 percent chance of a rise in rates on Wednesday, and attention is shifting to whether the Fed is now set for regular quarterly rate increases. Hong Kong's Hang Seng declined 35.10 points or 0.15 percent to end at 23,792.85.

The sigh of relief was heard across Asia as investors had feared faster US hikes and more political upheaval in Europe could spook funds out of emerging markets.

The Federal Reserve raised its benchmark interest rate by 25 basis points to a target range of 0.75 percent to 1 percent in a widely-telegraphed move.

While recent economic Chinese data has been supportive, Premier Li said at a press conference that China's economy faces domestic and external risks this year, but added the country has many policy tools to cope with them.

HONG KONG Asian stocks consolidated recent gains on Wednesday before a USA central bank policy meeting that could signal how much monetary tightening to expect during the remainder of the year, with an immediate rate hike fully priced in by markets.

The Dow Jones industrial average was up 0.54 percent to finish at 20,950.1, the S&P 500 rose 0.84 percent to close at 2,385.26 and the Nasdaq composite added 0.74 percent to 5,900.05.

That was painful news for bond bears who had built up huge short positions in Treasuries in anticipation of a hawkish Fed. The dollar index against a basket of currencies fell to the three-week low of 100.510.DXY, notably below the 101 handle. The dollar suffered similar losses on the yen to huddle at 113.38.

The euro edged up 0.3 percent to $1.0631.

Richard Franulovich, a forex analyst at Westpac, noted history showed a strong positive correlation between the dollar and yields one week after a Fed meeting and the direction and magnitude of the change in policymakers' projected rate increases - termed dots - from meeting to meeting.

Higher rates would make the USA more attractive and could siphon away capital from emerging markets and weaken their currencies. Spot gold saw its biggest daily gain since September 2016, and traded on Thursday morning at $1,225.13 per ounce.

  • Leroy Wright