Asian Markets Drop as Fed Eases Rate Cuts, Investors Eye BOJ Meeting

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Asian stocks dropped, bond yields rose, and the dollar hovered near a two-year high on Thursday following the U.S. Federal Reserve's announcement that it would slow the pace of rate cuts in 2025, with investors also awaiting a key policy decision from the Bank of Japan.

Although the Fed cut rates as expected on Wednesday, Fed Chair Jerome Powell's remarks about being cautious in the future led to a sharp decline in U.S. stocks, a surge in Treasury yields, and a reduction in bets on further rate cuts. The Dow Jones Industrial Average dropped more than 1,000 points.

Asian markets followed Wall Street's lead, with the MSCI Asia-Pacific index excluding Japan down 1%. Japan's Nikkei fell 1.8%, and Australian shares slid over 2%.

Powell mentioned the need for caution, signaling that the central bank would make just two rate cuts of a quarter percentage point by the end of 2025, fewer than previously projected.

This shift in Fed policy lifted the dollar index, which measures the U.S. currency against six major rivals, to its highest point since November 2022. The dollar was at 108.15 in early Thursday trading.

Sterling remained steady at $1.25835 ahead of the Bank of England's policy decision, where the central bank is expected to keep rates unchanged despite signs of slowing economic growth.

The yield on U.S. 10-year notes reached a seven-month high of 4.524% on Wednesday, staying near that level at 4.51% in early Asian trading.

The Fed's policy shift, driven by rising U.S. inflation and economic activity, has prompted a pullback in risk assets, including stocks and Bitcoin. Bitcoin fell 5% to $100,340 following Powell's comments about the Fed's stance on cryptocurrency.

As the Fed’s actions and rising Treasury yields impacted markets, the focus shifted to the Bank of Japan's policy decision, with Japanese 10-year government bond yields rising. The yen was hovering around 154.81 per dollar, near the weaker end of its range this year.

Market expectations for the BOJ's rate hike have shifted, with a 20% chance of a rate increase later on Thursday. Investors are looking for comments from BOJ Governor Kazuo Ueda to gauge the timing and extent of future rate hikes, with some predicting hikes to begin in early 2025.

 

 

 

 

 

 

 

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author.