In a recent statement, Federal Reserve Chairman Jerome Powell indicated that US interest rates could remain high for a long time, which could have a significant impact on Asian markets in the coming trading days. Powell's comments came amid concerns that inflation will not fall to the Fed's 2% target as quickly as expected.
Tuesday's session saw Chinese stocks fall 1%, while Japanese and Asian stock indexes fell 2%. Currencies across Asia also weakened, with the yen near 155.00 against the dollar, a situation that has yet to prompt intervention from Tokyo.
Despite the IMF's upgraded US growth forecast and China's stronger-than-expected first-quarter growth, which could lead to an upward revision of the outlook, these potential positive signals for Asian markets are being overshadowed by the strength of the US dollar, rising Treasury yields and escalating Middle East tensions.
The MSCI Asia ex-Japan index hit a two-month low after falling 4% over the past four days, raising questions about whether this is a temporary pause or the start of a more significant sell-off.
The Japanese yen continued to hit a 34-year low, with investors closely watching any domestic factors that could affect its value, such as inflation data and comments from Bank of Japan Governor Kazuo Ueda later this week.
The economic calendar in Asia and the Pacific is light on Wednesday, with New Zealand inflation data a key highlight. A Reuters poll forecasts that New Zealand's annual inflation rate will fall to 41.3% in the first quarter from 4.71% in the previous quarter, likely marking the lowest since the second quarter of 2021. Investors will also be looking to the IMF/World Bank meetings in Washington, as well as Japan's March trade data, for guidance.
Source: Investing
