Asian markets fall as investors eye US Fed outlook

Tokyo, Hong Kong and Shanghai fell – although Sydney, Seoul, Taipei, Wellington and Manila rose in broad daylight. ―Photo Reuters

Wednesday August 24, 2022 11:33 MYT

HONG KONG, Aug. 24 — Asian markets were lower on Wednesday after global equities fell as the euro plunged against the dollar and traders awaited news on upcoming U.S. interest rate hikes.

The single currency fell to US$0.9901 – a new 20-year low – but then recovered its losses as the greenback was hit by poor US economic data.

The dollar strengthened this week ahead of Friday’s speech by US Federal Reserve chief Jerome Powell as markets speculate that the central bank will continue to tighten monetary policy.

Higher interest rates boost the US currency as they make dollar-denominated debt more attractive to investors.

But the euro was also weighed down by a gloomy outlook for the eurozone economy as Russia’s war in Ukraine drove up energy prices.

The unit dipped below parity with the dollar on Monday on recession fears to hit the lowest levels since 2002, when it entered physical circulation.

In the latest blow, the closely watched S&P Global’s monthly Composite Purchasing Managers’ Index (PMI) showed that economic activity in the eurozone fell for the second consecutive month in August.

With the central bank’s Jackson Hole symposium this week, the focus is on what Fed chief Powell says about plans to tackle high prices, with many officials fearing the economy will goes into recession.

“I think investors are bracing for a hawkish commentary from Fed Chairman Powell this coming week,” said Jack Ablin of Cresset Capital.

Wall Street indices mostly ended lower, and key markets in Asia followed suit.

Tokyo, Hong Kong and Shanghai fell – although Sydney, Seoul, Taipei, Wellington and Manila rose in broad daylight.

U.S. natural gas prices, meanwhile, hit a new 14-year high on Tuesday at US$10.028.

But across the Atlantic, the prices of European natural gas have fallen, even if they remain high for fear of a stoppage of gas deliveries to Russia.

Gas had hit record highs in March after the main Russian producer launched its invasion of neighboring Ukraine.

This triggered a rise in national energy bills, fueling decades-high inflation that has led to tighter monetary policy around the world.

Moscow’s maneuvers have hit the single currency hard as the bloc relies heavily on imported Russian gas, Societe Generale analyst Kit Juckes said.

“The problem with the euro is…the threat of a continued tightening of gas supplies and the cost of replacing Russian gas,” Juckes said. —AFP

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