A forex trader monitors exchange rates in a trading room at KEB Hana Bank in Seoul on March 13, 2020.
YOUNG YEON-JE | AFP via Getty Images
SINGAPORE – Stocks in Japan and South Korea rose on Thursday as investors reacted after the Federal Reserve’s political committee decided to keep short-term lending rates near zero at a widely anticipated pace.
Japan’s Nikkei 225 rose 1.4% while the Topix index rose 0.93%. The South Korean Kospi rose 1.17% and the Kosdaq rose 0.83%.
Australian stocks hovered between gains and losses, with the benchmark ASX 200 index down 0.26% as most sectors traded lower. However, the energy and materials sub-indices rebounded from losses in the previous session, rising 0.59% and 0.45%, respectively.
US stocks rose overnight, pushing the Dow Jones Industrial Average to its first close above 33,000, while government bond yields fell from previous highs.
Fed decision
The Fed raised its expectations for economic growth, but stated that there will likely be no rate hikes until 2023.
Chairman Jerome Powell said he expected inflation to rise this year, partly due to weak year-on-year comparisons from the early days of the Covid-19 pandemic in 2020. However, he said that this will not be enough to change the policy aimed at inflation over a period of over 2% for any period if it helps to achieve full and inclusive employment.
Four of the 18 members of the Federal Open Market Committee were looking for a rate hike in 2022, compared to just one at the December meeting, according to the “scatter chart” of each member’s forecast. Seven members are seeing a hike in 2023, compared to five in December.
The members of the FOMC forecast quarterly where interest rates will go in the short, medium and long term. These projections are graphed visually and are known as a scatter plot.
“The FOMC statement was very similar to the January one,” Commonwealth Bank of Australia strategists wrote in a note Thursday morning. “The committee noted, however, that activity and employment indicators have risen recently. Nonetheless, the statement maintained that the ongoing health crisis continues to pose” significant risks to the economic outlook “and that current levels of policy arrangements are appropriate remains.”
“The combination of unchanged median dot plots and the reluctant comments from Chair Powell depressed USD and US bond yields (after yields rose earlier in the day),” noted the CBA strategists.
Currencies and oil
In the forex market, the dollar fell against a basket of competitors as the dollar index fell from near 91.900 prior to the Fed’s decision to around 91.371 Thursday morning during Asian trading hours.
The Japanese yen changed hands at $ 108.92 a dollar while the Australian dollar rose 0.44% to $ 0.7828.
Oil prices barely moved during Asian trading hours on Thursday. US crude oil futures were slightly lower at $ 64.54 while the global benchmark Brent index fell 0.1% to $ 67.93.
Energy prices fell overnight on mounting fuel demand concerns and rising US inventories. In Europe, there are concerns that economic recovery could be delayed after several countries temporarily stopped using AstraZeneca’s Covid-19 vaccines due to concerns about possible side effects.
– CNBC’s Jeff Cox contributed to this report.
