Fed optimism lifts global markets, US dollar

Fed optimism lifts global markets, US dollar
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First Published: Wed, Aug 08 2007. 12 45 PM IST
Updated: Wed, Aug 08 2007. 12 45 PM IST
Hong Kong: Asian stocks extended early gains on 8 August and the dollar climbed against the yen as worries about a credit squeeze eased after the US Federal Reserve gave a positive outlook for the world’s biggest economy.
The upbeat sentiment looked set to extend to Europe where financial bookmakers are calling for initial gains of around half a percent for Britain’s FTSE 100, Germany’s DAX and France’s CAC-40.
The Fed, which left its key interest rate unchanged at 5.25% in a widely expected move, said while tightening credit conditions were a risk to the US economy, inflation was still its main worry.
Those comments knocked back expectations of a cut in US interest rates, helping shore up the dollar, while an interest rate hike in Australia gave the Aussie dollar a boost.
“It looks like the Fed delivered the best possible statement to relieve the market. While touching on the credit issue, it maintained a positive economic outlook,” said Kim Joong-hyun, an analyst at Goodmorning Shinhan Securities in Korea.
Tokyo’s Nikkei average closed 0.6% higher, while Australia’s S&P/ASX 200 index rose 1.9% and South Korea’s KOSPI added 2.3% .
Corporate takeover talk helped spur the Australian market, which took the widely expected rate hike in its stride, while news of an inter-Korean summit sparked a rally in South Korean firms involved in projects with North Korea such as Hyundai Merchant Marine
Among other major markets in the region, Taiwan’s TAIEX and Singapore’s Straits Times Index both rose more than 2%, while Hong Kong’s Hang Seng index was up 2.1%.
Diminished expectations of a rate cut by the Fed helped the dollar extended its rise against the yen which was also dragged down by the weak Japanese machinery orders data.
But market players were still cautious about the possibility of a further fallout from the US credit crisis, and were still looking to the performance of stock markets for cues.
The dollar rose 0.2% from late US trade to 119 yen after reaching a high of 119.09 yen and the euro climbed about 0.2% to 163.54
Against the dollar, the euro dipped to around $1.3720
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First Published: Wed, Aug 08 2007. 12 45 PM IST