HONG KONG: Asian markets mostly fell further on Friday, extending a sell-off in line with steep losses on Wall Street after the US Federal Reserve signaled a possible end to its multibillion-dollar stimulus program.
However, early losses in Tokyo were reversed thanks to a surging dollar, which began heading back toward the 100 yen level.
The losses are part of a global correction in equities and commodities, which have enjoyed strong rallies since the Fed unveiled its bond-buying scheme, called quantitative easing (QE), in September.
Tokyo began the day 2 percent lower, adding to a slump on Thursday, but it reversed course in the afternoon, thanks to the dollar rally and closed 1.66 percent higher, adding 215.55 points to 13,230.13.
Sydney fell 0.41 percent, or 19.6 points to 4,738.8, while Seoul tumbled 1.49 percent, or 27.66 points to 1,822.83.
Hong Kong lost 0.59 percent, or 119.56 points to end at 20,263.31, and Shanghai was off 0.52 percent, or 10.93 points at 2,073.09. Both markets pared earlier losses after reports that the country’s central bank had pumped billions of dollars into several lenders to ease a liquidity crisis.
Markets have been in turmoil since last month as talk mounted that the Fed would pull the plug on its $85-billion-a-month QE, which was put in place to help kick-start the US economy.
A series of upbeat US indicators added to those concerns and Fed chief Ben Bernanke confirmed dealers’ fears on Wednesday, when he said that the central bank would begin to limit the spending this year if the economy continues to pick up.
He also suggested the whole scheme could be wound up by mid-2014.
Michael Hewson, senior market analyst at CMC Markets UK, called the markets’ reaction “a classic case of perverse logic,” given that Bernanke was clearly signaling stronger US growth.
On Wall Street, the Dow sank 2.3 percent, or 354 points, its largest points loss since November 2011, while the Standard and Poor’s 500 lost 2.5 percent, and the Nasdaq tumbled 2.3 percent. The markets had lost around 1 percent on Wednesday soon after Bernanke’s announcement.
“US shares had been advancing for so long—almost without a serious pullback—that it was almost about time we finally saw one,” Kenichi Hirano, market adviser at Tachibana Securities in Tokyo, told Dow Jones Newswires.
Markets in emerging economies were also badly hit, as traders who had ploughed in cash looking for better returns retreated to the safety of the United States.
However, the greenback rallied on expectations that fewer dollars will be sloshing around financial markets if the Fed rolls back its QE.
It bought 97.90 yen on Friday, compared with 97.27 yen in New York City late on Thursday. It was also well up from the 95.50 yen in Tokyo on Wednesday before the Fed decision.
The euro traded at $1.3222 in Asia from $1.3223, and 129.39 yen compared with 128.83 yen.