Asian stocks come under pressure on Friday, with the yen taking the biggest hit as worries continue to mount over how the Fed plans to tackle inflation, despite inflation easing a bit last week.
The current uncertainties over Fed’s continued aggressive monetary policy have forced Asian stocks lower, with the MSCI’s broadest index of Asia-Pacific shares losing 0.10% during the early Asian trading session. Similarly, Australia’s AXJO edged lower by 0.62%.
While most Asian shares came under significant selling pressure, Japan’s Nikkei was bullish, rallying 2.37%, its highest level since January. On the flip side, the yen has continued to trail the dollar, losing 1.24% of its value to trade at 133.39 to the greenback.
Following an encouraging inflation report, most global stocks edged higher, with the dollar taking a breather. Now, investors look forward to comments from Fed speakers for any signs that it plans to ease further tightening.
Meanwhile, China’s blue-chip stock index had a great day on Thursday as the company reported its biggest jump in over three months.
Fed’s Aggressive Monetary policy: What is yet to come?
According to San Francisco Federal Reserve Bank’s President, Mary Dally, the Fed is considering a 50 basis point rate hike next month but is open to more significant hikes should there be a need for that. She further said that the Fed would continue to take steps to address the country’s high inflation level. As of right now, rates are between the 2.25% to 2.5% range.
Also, the Chicago Fed President, Charles Evans, clarified that the Fed might have to increase the policy rate from 3.25 to 3.5% this year to manage inflation. Adding that, it may increase to 3.75% to 4% by the wrap of next year. This is pretty close to what Fed Chair Jerome pointed out during its meeting in July.
Investors are still digesting these comments from the Fed to at least get an insight into what to expect from future interest rate hikes. However, bets for a 75 basis point hike in September are as high as 68%.