SYDNEY- The dollar surged to a fresh two-decade high and Asian stocks hit a two-year low on Thursday as the prospect of US interest rates rising further and faster than expected spooked investors.
The Federal Reserve raised its benchmark rate by 75 basis points on Wednesday, the third such rise in a row, and officials project rates hitting 4.4 percent this year – higher than markets had priced in before the meeting and 100 bps more than the Fed projected three months ago.
The dollar rose, short-dated bonds sold off and Wall Street fell overnight, with the moves extending into the Asia session.
The euro sank to a 20-year low of $0.9807 amid growing concerns about an escalation in the war in Ukraine after Russia mobilized reservists for the first time since World War II.
The dollar index, which is up 2 percent this week and almost 17 percent this year, rose 0.2 percent to a new 20-year high at 111.72. Gold fell 1 percent. S&P 500 futures eased 0.8 percent and European futures dropped 2 percent.
Sterling hit a 37-year low and the Aussie, kiwi, Canadian and Singapore dollars hit two-year lows. China’s yuan hit a two-year low and the yen hovered near a 24-year low as investors awaited a Bank of Japan meeting.
MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 1.4 percent to its lowest since May 2020. Japan’s Nikkei fell 1 percent to a two-month low.
“The Fed is not going to stop any time soon and there’s going to be an extended period of restrictive monetary policy for at least the next year or so,” said Sally Auld, chief investment officer at wealth manager JB Were in Sydney. — Reuters
