HONG KONG: Asian markets surged on Wednesday, while the dollar held its strength after overnight gains as buying confidence returned to trading floors ahead of an expected US interest rate rise.
After more than a week of sharp losses, equities enjoyed some healthy buying after a rally in New York and Europe fuelled by upbeat economic data and a rare rally in oil prices.
However, the crude gains were short-lived and prices resumed their downtrend in Asian trade Wednesday, with buying dampened by data indicating US stockpiles rose last week.
The commodity has taken a hammering since December 4—falling about 12 percent—when the OPEC exporters’ group refused to set output limits, adding to worries about a supply glut.
The Federal Reserve is expected later Wednesday to raise borrowing costs at its policy meeting, ending months of speculation and uncertainty on global markets.
And while the move could be considered a reason to sell shares, analysts said the rise had largely been priced into assets.
“Markets had time to prepare for this day, with investors winding back risk ahead of the event,” Tim Schroeders at Pengana Capital in Melbourne told Bloomberg News.
However, he added: “What happens after the Fed rate hike is difficult to tell, especially since we’re coming into a quiet period around Christmas and New Year. Volatility will probably continue.”
The case for an increase has grown stronger over the past year as the US economy continued to show it was enjoying a healthy recovery. The argument was reinforced Tuesday by data showing year-on-year consumer inflation hit two percent in November, matching the Fed’s target rate.
The news lifted the dollar to 121.66 yen in New York from around 120.80 yen earlier Tuesday in Asia, while the euro dipped to $1.0930 from above $1.10.
In Tokyo on Wednesday the dollar edged up against the Japanese unit but eased slightly against the single currency, which won some support from a better-than-expected reading on investor confidence in Germany, Europe’s biggest economy.
Regional stock markets were all higher, with Tokyo climbing 2.6 percent by the close, Sydney up 2.4 percent and Seoul 1.9 percent higher. Shanghai gained 0.2 percent.
Hong Kong closed up 2 percent to end a nine-session losing streak—its longest run of selling since 1984—that saw it stumble more than 5 percent.
There were also gains in other markets, with Manila, Jakarta and Taipei each climbing more than 1 percent.
The gains in Asia tracked strong advances in Europe Tuesday, where Paris and Frankfurt added more than 3 percent while in New York the Dow, Nasdaq and S&P 500 climbed around 1 percent.
In early European trade Wednesday London climbed 0.30 percent, Frankfurt gained 0.25 percent and Paris was up 0.15 percent.