Dollar struggles, Asia markets buoyed as US rate prospects recede
The dollar eased again Thursday and major Asian markets gained after the Federal Reserve gave a tepid inflation outlook, fuelling speculation it will hold off on further US rate hikes this year.
Regional traders tracked fresh Wall Street records on optimism about corporate earnings as a host of big names disclosed results
Tokyo, Hong Kong and Sydney all rose while Seoul was boosted by Samsung Electronics forecast-beating, record-breaking profits that were fuelled by sales of its new Galaxy S8 smartphones and memory chips.
The Federal Reserve held interest rates Wednesday and confirmed plans to begin winding in its massive bond holdings “relatively soon”, as expected.
But the central bank statement also noted that inflation continues to run below its two percent target, which traders took as a negative for the dollar and raised questions about any possible further rate hikes this year.
“Any chance of a September rate hike seems to have disappeared while the Fed’s statement balance sheet reduction will begin ‘relatively soon’ could mean that too has been pushed out,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
“The US dollar has come under intense pressure once again, rates eased a little, and stocks can focus on the continued earnings surprises.”
McKenna added there was little chance of a US dollar recovery in the near term.
The greenback fell sharply against its major peers following the Fed statement, with the euro climbing to its highest level in more than two years.
It was also well off against higher-yielding currencies, with the Australian dollar spiking 1.5 percent and breaking 80 US cents for the first time since mid-2015.
The greenback fell more than one percent against the New Zealand dollar and the South African rand.
On equity markets Tokyo ended the morning 0.2 percent higher, Hong Kong added 0.4 percent and Seoul gained 0.2 percent, although Shanghai dipped 0.3 percent. Sydney rose 0.3 percent.
Samsung — the world’s largest maker of mobile phones — said operating profit soared a forecast-beating 72.9 percent from the previous year to 14.07 trillion won ($12.6 billion). That puts in on course to beat Apple, which consensus forecasts say will report a $10.6 billion profit next week.
Oil prices fell as traders booked profits from a recent rally that was powered by Saudi Arabia’s move to limit exports and a decline in US crude inventories.
Prices had surged in recent days, with Brent crude breaching the $50 mark and US benchmark West Texas Intermediate rising to eight-week highs above $48.
Analysts said the bullish trend is expected to continue after the US Energy Information Administration said Wednesday that commercial crude inventories fell 7.2 million barrels in the week to July 21.
Bloomberg News contributed to this report
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: UP 0.2 percent at 20,093.41 (break)
Hong Kong – Hang Seng: UP 0.4 percent at 27,042.35
Shanghai – Composite: DOWN 0.3 percent at 3,237.83
Euro/dollar: UP at $1.1739 from $1.1735
Pound/dollar: UP at $1.3130 from $1.3114
Dollar/yen: DOWN at 110.96 yen from 111.18 yen
Oil – West Texas Intermediate: DOWN seven cents at $48.68 per barrel
Oil – Brent North Sea: DOWN six cents at $50.92
New York – DOW: UP 0.5 percent at 21,613.43 (close)
London – FTSE 100: UP 0.8 percent at 7,434.82 (close)