Expectations the US will hike interest rates and the EU will also tighten monetary policy dragged most Asian markets lower yesterday, but Tokyo chalked up a third-straight gain as a weaker yen helped exporters.
The dollar pushed on with this week’s rally against global currencies, including hitting another three-decade high against the beleaguered pound.
Investors were given a weak lead by their US counterparts after comments from two top Federal Reserve officials fanned speculation it will lift borrowing costs before the end of the year.
Talk of an increase returned after data last week showed US factory activity rebounded in September, while trading floors gear up ahead of a crucial jobs report tomorrow.
On Tuesday Cleveland Fed president Loretta Mester said she saw a strong case for a rate hike in November.
They were followed by Richmond Fed head Jeffrey Lacker, who said a rise was needed to avert a surge in inflation that could lead to sharp rate hikes later.
“A December rate hike seems almost certain, and it sounds like that may be followed by two more rate hikes next year instead of one,” Chihiro Ohta, a Tokyo-based senior strategist at SMBC Nikko Securities, told Bloomberg News.
Bloomberg also cited unnamed European Central Bank officials on Tuesday as saying there was an “informal consensus” that it should gradually scale back its bond-buying programme in steps of €10bn.
The news from Europe and the US comes as analysts warn the years of cheap cash are likely coming to an end, with the US economy picking up.
Talk of higher US rates has boosted the dollar this week and yesterday it toyed with 103 yen in the morning before dipping back to 102.90 yen, slightly up from its level in New York.
The greenback also stormed higher against higher-yielding Asia-Pacific currencies, including the Australian dollar, South Korean won, Indonesian rupiah and Malaysian ringgit.
Japan’s exporters were lifted by the weaker yen, sending the Nikkei stock index to end up 0.5%, extending a rally to three-straight days.
Hong Kong posted a third gain, adding 0.4%, with the Hang Seng buoyed by recent upbeat China data and the impending opening of a link-up with the Shenzhen stock exchange that could see fresh funds flood in.
But most other Asian stock markets struggled. Sydney fell 0.6%, Seoul lost 0.1%, Manila tumbled 1.2% and Wellington was off 1.1%. Singapore was flat.


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