Stocks Fell and Dollar Strengthened, Eyes Now On BoE

On Thursday, Asian markets fell broadly in line with Wall Street's performance as traders perceived the most recent U.S. Federal Reserve policy comments as indicating higher interest rates for the foreseeable future.

By early afternoon Hong Kong time, the largest MSCI index of equities outside of Japan for the Asia-Pacific region was down 0.4%. Nikkei in Japan fell 0.6%. Hong Kong's benchmark lost 1.3% while China's blue-chip fell 0.6%.

On Thursday morning, the yield on two-year U.S. Treasury notes reached a 17-year high of 5.1970%. By early afternoon, it was circling around the 5.18% mark.

The U.S. central bank kept interest rates steady on Wednesday and predicted a raise by year's end, noting that monetary policy will likely be much tighter than originally anticipated through 2024.

By year's end, the federal funds rate is expected to be 5.1%, up from the June projection of 4.6%.

The Fed predicts relatively modest first cuts to its policy rate, even as inflation declines throughout the remainder of 2023 and the following years.

The U.S. dollar recovered, U.S. Treasury rates rose to multi-year highs, the yield curve flattened, and equities plunged as a result of upward adjustments to U.S. officials' median rate predictions for the upcoming two years.

The dollar index, which compares the value of one currency to a basket of its competitors, increased to 105.59 on Thursday, its highest level since March 9, causing the yen to drop to its lowest level since November.

As concerns grow over whether the Bank of England would follow its American counterpart in maintaining rates on Thursday, sterling fell to new multi-month lows following a Wednesday inflation data that surprised on the negative.

Investors are now anticipating the Bank of England's Thursday monetary policy announcements, which will provide market guidance.

(Sources: investing.com, reuters.com)