Asian markets were mostly lower on Thursday as the dollar strengthened sharply and investors digest the Federal Reserve’s first interest rate rise this year and its hawkish rate outlook for 2017.
The Fed’s 25 basis points rate hike was widely anticipated by the market, but it was the projected trajectory of three rate hikes for 2017 that raised concerns.
“The 2017 dot-plot was revised higher as well, with 11 out of 17 Fed officials expecting three rate hikes next year, up from September’s median of two rate hikes,” said Chang Wei Liang, FX strategist at Mizuho Bank, in a note on Thursday.
“The dollar surged given the hawkish 2017 rate guidance, as markets were actually expecting a dovish rate hike,” Chang added.
The dollar index, which tracks the greenback against a basket of currencies, was trading at 102.3, its highest since January 2003.
The spike in the dollar weighed on the yen which fell to a near 11-month low, at 117.51 against the greenback as of 1:53 pm HK/SIN, while the Australian dollar slipped to $0.7411.
Down Under, the ASX 200 closed down 0.82 percent or 46.02 points at 5,538.6, with strong declines in its energy sub-index, which was down 3.39 percent, and its all-ordinaries gold sub-index, which plunged 4.98 percent on lower spot gold prices.
The Australian jobs market saw improvements in November, with employment up 39,100 compared to Reuters forecast calling for a 20,000 gain. However, unemployment rates rose to a higher-than-expected 5.7 percent in November, compared to October’s 5.6 percent.
Casino company Crown Resorts said its first half revenue would drop 12 percent due to a weaker VIP business segment, and announced that it would raise 1.6 billion Australian dollars ($1.18 billion) by selling shares in Melco Crown Entertainment. Shares of Crown Resorts were halted for trading today.
In Japan, the Nikkei 225 finished up 0.1 percent or 20.18 points at 19,273.79 after surging more than 0.9 percent earlier.
Major Japanese automakers were an exception and traded higher, likely due to the weaker yen which would increase the value of profits earned overseas. Toyota was up 1.46 percent to 7,133 yen, Suzuki Motor was up 1.21 percent at 4,082 yen, while Honda was 1.27 percent higher at 3,521 yen per share.
Across the Korean strait, the Kospi recovered from earlier losses to trade up 0.1 percent.
The Bank of Korea held its key policy rate steady as expected at 1.25 percent for the six straight month. The central bank governor Lee Ju-yeol said that biggest concern is over the political scandal, which led to the parliament voting to impeach President Park Geun-hye, causing sentiment to worsen. South Korea’s top court has the final say on the impeachment and has started what may be a lengthy review.
Mainland Chinese shares were lower: the Shanghai composite was down 0.72 percent while the Shenzhen composite was up 0.67 percent.
Hong Kong’s Hang Seng tumbled 1.84 percent. The Hong Kong dollar is pegged to the greenback, and a stronger local currency might put pressure on borrowing costs and make exports more expensive.
Meitu, a China-based firm that has developed an app that helps touch up selfies, fell 3.3 percent to 8.49 Hong Kong dollars per share. It had opened higher at HK$8.78 compared to its IPO price of HK$8.50, which was priced at the bottom end its indicative range.
The photo editing company raised $629 million in its initial public offering and was valued at $4.6 billion.
While emerging markets could benefit from firmer U.S. growth, they remain vulnerable to volatile capital flows, said analysts at Moody’s Investors Service in a note on Thursday.
“Emerging markets exporters will benefit if U.S. growth translates into higher import demand. However, a resurgence of heightened cross-border capital flow volatility in response to the Fed’s tightening could have negative spillovers for those with large external funding needs, high leverage, macroeconomic imbalances, or uncertainties around politics and policies,” they added.
Overnight, U.S. markets finished lower, led by losses in energy and utilities, with the Dow Jones industrial average falling 0.96 percent, snapping eight straight sessions of gains. The S&P 500dropped 0.81 percent to 2,253.28 and the Nasdaq composite ended 0.5 percent lower at 5,436.67.
Investors will eye the central banks decisions out of Taiwan, Indonesia and the U.K. on Thursday.
U.S. crude futures were trading down 0.16 percent at $50.96 a barrel during Asian trade on Thursday, while global benchmark Brent futures was up 0.04 percent at $53.92.
Oil prices, which are dollar-denominated, fell more than 3 percent on the stronger greenback in the U.S. on Wednesday.
Spot gold was trading at $1,140.61 an ounce, its lowest levels since February.