TOKYO: Most Asian equity markets outside Japan rallied after comments by the US Federal Reserve cooled expectations of an early rate hike, while the euro and yen retreated against the dollar after racking up big gains in New York.
While the US central bank opened the door for a rise after six years of zero per cent rates, it lowered its forecasts for economic growth and inflation and stressed it would remain cautious before making any move.
News that the Fed is in no hurry to depart from the loose monetary policy that has supported shares sent Wall Street surging, providing a strong platform for Asian indexes.
Seoul ended up 0.47 per cent, or 9.44 points, at 2,037.89, while Hong Kong rallied 1.45 per cent, or 348.81 points, to 24,468.89.
However, Tokyo sank 0.35 per cent, or 67.92 points, to close at 19,476.56 as exporters were hurt by the strengthening yen. Shanghai retreated 0.31 per cent in late trade after rising almost nine per cent in a six-session winning streak.
After a two-day policy meeting, the Fed issued a statement that removed a pledge to remain “patient” on raising interest rates, signalling a possible mid-year rate increase.
But bank chair Janet Yellen stressed growth prospects were more muted than three months ago, despite strong increases in jobs creation. She noted consumer spending has slipped, inflation has declined, wages are flat, and the stronger dollar has hurt US exports.
The policy committee lowered its rate outlook to 0.5-0.75 per cent for the end of this year, from 1.0 per cent previously, while also reducing its 2016 forecast to 1.75-2.5 per cent from 2.5 per cent.
“Just because we removed the word patient from the statement doesn’t mean we’re going to be impatient,” Yellen told reporters.The news sent the dollar tumbling and provided much-needed relief for the euro, which has been hammered by the European Central Bank’s new stimulus program.
