Asian markets boosted by Fed but dollar sinks

Asian markets rallied and the dollar sank on Thursday. (AFP)
Updated 16 March 2017

Asian markets boosted by Fed but dollar sinks

HONG KONG: Asian markets rallied and the dollar sank on Thursday after the Federal Reserve lifted US interest rates but gave a more dovish outlook for future hikes, while the euro was also boosted by the expected victory of the incumbent party in Dutch elections.
After a much-anticipated meeting the US central bank lifted borrowing costs by a quarter of a point but suggested only another two rises this year, confounding talk of a possible three or four.
Fed boss Janet Yellen also said that while President Donald Trump’s planned big-spending, tax-cutting plans could fuel growth and inflation, she would keep a wait-and-see attitude before making any decisions on how to shape monetary policy.
The news, which came with an upbeat assessment of the world’s top economy, fired US stocks and sent the greenback tumbling in US trade. And that continued into Asian business, with Hong Kong up 1.7 percent and Shanghai adding 0.8 percent.
The Fed move led Hong Kong’s de facto central bank to lift its own borrowing costs owing to a monetary policy link, and the Chinese central bank to lift short-term rates it charges banks to borrow cash in a bid to prevent a flood of cash out of the country and support the yuan.
The People’s Bank of China has struggled in recent months to staunch capital flight caused by investors looking for better returns in the US, pushing the yuan to around eight-year lows against the dollar.
Andrew Polk, Beijing-based head of China research at Medley Global Advisers, said: “Moving in line with the Fed also shows that China is still essentially importing US monetary policy, despite increased capital controls over the past several months.”
Seoul advanced 0.8 percent, Sydney ticked up 0.2 percent and Singapore was 0.8 percent higher, while there were also big gains in Wellington, Taipei, Jakarta and Manila.
“Whether folks agree or disagree with the need to hike, the key here is that the Fed has signalled to markets, and importantly US and global businesses, that it is in control and the economy is moving as expected,” said Greg McKenna, chief market strategist at AxiTrader, in a note.
“Janet Yellen stressed in her press conference that the Fed’s decision today was a reflection of where the economy is now with reference to the Fed’s mandate. She highlighted that the (policy board) was not making a judgment on what impact the Trumponomics stimulus might have on the economy.”
Tokyo ended 0.1 percent higher, recovering from early losses as a pick-up in the yen was offset by the Bank of Japan’s upbeat assessment of the nation’s economy. The US unit bought 113.25 yen Thursday, down from Wednesday in New York and well off the levels above 115 yen touched earlier this week.
The greenback was also sharply down elsewhere, with the Australian dollar surging 1.5 percent, South Korea’s won 1 percent higher and the Mexican peso soaring 2.2 percent. The New Zealand, Canadian and Taiwanese dollars also posted strong gains of around 1 percent.
Stephen Innes, senior trader at OANDA, said: “The absence of any observable hawkish guidance from the Fed will leave the greenback under pressure near term.”
The euro sat comfortably above $1.07, more than one cent up from earlier Wednesday, as exit polls showed Dutch Prime Minister Mark Rutte easily defeating far-right, anti-EU rival Geert Wilders in a vote considered a bellwether of populist support in Europe.
The victory raised hopes extremist parties in France and Germany will also be held off in elections later this year.
“Following the Dutch election result, it’s unlikely to see concerns heighten over the French election,” Shinichiro Kadota, a senior foreign-exchange strategist at Barclays Securities Japan in Tokyo, told Bloomberg News.


Group behind Facebook’s Libra coin announces 21 founding members

Updated 17 min 59 sec ago

Group behind Facebook’s Libra coin announces 21 founding members

  • Planned Libra global currency faces swelling criticism from regulators
  • Group of Seven warned it poses a threat to the global financial system

GENEVA: The Libra Association, created by Facebook to launch its new cryptocurrency, has announced its 21 founding members after defections by previous supporters including Visa and Mastercard.
The announcement on Monday came as the planned Libra global currency faces swelling criticism from regulators, and reported warnings from the Group of Seven that it poses a threat to the global financial system.
The group kicked off its first council meeting in Geneva and founding members including Uber, Spotify and Vodafone formally signed onto the Libra Charter, director general Bertrand Perez said.
“We now have a total guarantee of their involvement, so we have confidence in the project,” he said.
Last month, the non-profit association voiced hope that the number of companies backing it when it opened for business would swell from an initial 28 to “well over 100.”
But instead the list has shrunk, after more of its initial backers walked away amid swelling criticism from regulators around the world.
Credit card giants Visa and Mastercard, online marketplace eBay and digital payments firm Stripe each announced Friday they had changed their minds about being founding members of the association, following a similar recent announcement by digital payments firm PayPal.
The Libra Association confirmed Friday that the companies would no longer be founding members, but said it would continue building an alliance of businesses, social-good organizations, and others to implement the cryptocurrency.
Its launch was originally planned for mid-2020, but Perez said he had not ruled out a later start date.
“What we want is to build a platform that is solid, that is there to last and that will survive in the long term,” he said, adding he was still “optimistic” about reaching around 100 members as planned.
The membership departures came after US senators sent letters to several financial firms noting that they could face “a high level of scrutiny from regulators” if they participated in the new currency plan.
French economy and finance minister Bruno Le Maire had warned that under current circumstances, Libra posed a threat to the “monetary sovereignty” of governments and could not be authorized in Europe.
Facebook executives have, however, claimed the new digital coin could help lower costs for global money transfers and help those without access to the banking system.
Facebook chief Mark Zuckerberg is set to testify at an October 23 hearing in the US House of Representatives on the Libra plan.
But in a fresh blow, a draft G7 report has outlined nine major risks posed by such digital currencies, according to the BBC.
The report, due to be presented to finance ministers at International Monetary Fund’s annual meeting this week, did not single out Libra but referred to “global stablecoins” with the potential to “scale rapidly” as posing a range of potential problems.
Stablecoins are seen as more steady than cryptocurrencies like Bitcoin, since they are pegged to traditional currencies such as the US dollar or the euro.
But the G7 draft report reportedly cautioned that such currencies could pose problems for policymakers setting interest rates, and could threaten financial stability if users suddenly suffer “loss of confidence” in the digital unit.
Randal Quarles, the head of the Financial Stability Board (FSB), which oversees regulation among G20 economies, also sent a letter to G20 finance ministers Sunday warning that “global stablecoins could pose a host of challenges to the regulatory community.”
This, he wrote, was “not least because they have the potential to become systemically important, including through the substitution of domestic currencies.”
“Stablecoin projects of potentially global reach and magnitude must meet the highest regulatory standards and be subject to prudential supervision and oversight,” he insisted.