HONG KONG: Asian markets mostly surged Thursday, extending a global rally that saw another record on Wall Street after the head of the Federal Reserve indicated it would take a gradual approach to raising US interest rates.
In closely watched testimony to Congress, Janet Yellen said the central bank would keep lifting borrowing costs as long as the world’s top economy showed improvement, taking into account inflation remained below its 2 percent target.
The remarks lit a fire under equities, with the Dow posting its highest close, on the prospect that money would continue to be cheap for the time being.
“The market is upbeat as Yellen’s comments suggest a slower pace of rate increases and that bodes well for liquidity conditions and stocks,” Banny Lam, head of research at CEB International Investment Corp. in Hong Kong, told Bloomberg News.
Hong Kong jumped 1.2 percent to its highest level since mid-2015 and Sydney climbed 1.1 percent. Singapore gained 0.6 percent and Seoul was 0.7 percent higher, with Wellington and Taipei also well up.
Shanghai was 0.6 percent stronger after data showed Chinese imports and exports both rose more than expected in June thanks to a pick-up in global demand.
Tokyo’s Nikkei ended flat with early gains eroded by a stronger yen, which hit exporters.
However, while equities were on the rise the dollar came under pressure as expectations for further monetary tightening from Washington this year eased.
There had been talk of late that the Fed would announce up to two more increases in rates before the year’s end.
“Markets seem to have concluded that … Yellen just blinked, now less confident that inflation is on track towards the Fed’s 2 percent target, with obvious implications for what that might mean for Fed policy,” Ray Attrill, head of FX strategy at National Australia Bank, said in a commentary.
Adding to downward pressure on the greenback is the ongoing crisis surrounding Donald Trump after his son released emails showing he had embraced Russia’s efforts to support the tycoon’s presidential campaign against Hillary Clinton.
The White House has been battered by accusations over Russian collusion and accusations of cover-ups — fuelling worries about the president’s ability to push through his market-friendly economic agenda.
The US unit held its losses against the yen and euro, while it was also sharply lower versus the Canadian dollar after that country’s central bank lifted interest rates and signalled more on the horizon.
In early European trade London and Frankfurt were both flat, while Paris rose 0.1 percent.