Asian shares trade higher, US dollar near two-month highs

by Jonathan Adams

MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.01 per cent, Hang Seng index advanced 0.53 per cent, KOSPI rose 0.16 per cent, while Nikkei added 0.31 per cent

Shares in Asia edged higher Friday but were set for a weekly loss, while the US dollar was near two-month highs as the US Fed projected interest rate hikes in 2023.

While the Fed messaging did not indicate an end to supportive policy measures such as bond-buying, investors were concerned amid signals of faster-than-expected rate hikes.

MSCI’s broadest index of Asia-Pacific shares outside Japan was barely above water in morning trade after four sessions in the red, edging up 0.01 per cent. Hong Kong’s Hang Seng index advanced 0.53 per cent and Seoul’s KOSPI rose 0.16 per cent. Chinese blue chips fluctuated between gains and losses, and were last down 0.1 per cent. Japan’s Nikkei added 0.31 per cent.

Gold prices edged higher but were still set for their worst week since March 2020. Spot gold was last up 0.56 per cent at $1,783.21 per ounce.

What is pretty obvious is that the inflation genie is starting to sneak out of the bottle, and that will be a major driver of interest rates in the short to medium term, said James McGlew, executive director of corporate stockbroking at Argonaut in Perth.

Adding to indications of a rebound in the world’s largest economy, new US data on Thursday showed growing factory activity and declining unemployment numbers despite an unexpected rise in weekly jobless claims.

Technology stocks were higher Thursday on hopes for a strong US recovery, lifting the Nasdaq Composite up0.87 per cent. But the broader market was down on worries about inflation and higher rates, with the S&P 500 inching down 0.04 per cent, while the Dow Jones Industrial Average (DJIA) dropped 0.62 per cent

While wage-price dynamics and inflation expectations are sticking to the Fed’s script, if they were to go off script even a bit, policymakers will need to pull forward when they begin and how quickly they normalise monetary policy, Mark Zandi, an economist with Moody’s Analytics, said in a note. While this is a tricky balance the Fed must ultimately manage in every business cycle, it is happening much earlier in this one.

US Treasury yields continued to rise on expectations of higher inflation. Benchmark 10-year notes yielded 1.5226 per cent, up from a close of 1.511 per cent on Thursday. The 30-year bond last yielded 2.1105 per cent.

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