Asian stocks under pressure, dollar extends gains
dollar strengthened further against major currencies as investors increased bets for further Federal Reserve policy tightening.
The Bloomberg dollar index rose to a fresh six-month high as investors increased expectations for the Fed to hike again this year. Treasury yields drifted higher across the curve Thursday, extending Wednesday increases that pushed two-year yields above 5%.
Australian bond yields followed Thursday, edging higher.
The moves followed data from the Institute for Supply Management’s US services index, which in August reached 54.4, its highest monthly reading since February and one that topped all estimates in a Bloomberg survey of economists. A reading above 50 denotes growth.
Traders will closely be monitoring markets in Japan and China after both countries took measures to defend their currencies.
Japan issued a stern warning about yen depreciation Wednesday, while China’s central bank provided unprecedented guidance to stabilize the yuan.
In stocks, Japan opened slightly higher, buttressed by the weaker yen, while equities in Australia and South Korea fell, mirroring a decline in US stocks Wednesday. The S&P 500 fell 0.7% to close lower for a second day.
The tech-heavy Nasdaq 100, which is more sensitive to interest rate expectations, declined 0.9%. Hong Kong and US futures were little changed.
“The ISM Services Sector report underscores the resilience of the largest portion of the economy,” said Quincy Krosby, chief global strategist at LPL Financial, who pointed to higher prices shown within the data.
“This is is certainly not good news for a data-dependent Fed.”
In Asia, China will release foreign reserves and trade data while Malaysia is expected to keep rates on hold at 3%. Reserve Bank of
