The South Korean won plunged more than 1 per cent against the dollar early on Monday after Janet Yellen’s comments on Friday raised the chance the Federal Reserve may raise U.S. interest rates soon, and even twice, by year-end.
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“All of the concerns and worries were addressed in (Fed Chair Yellen’s) speech”, said Alex Wijaya, a senior sales trader at CMC Markets.
Asked on CNBC whether a rate hike in September and more than one policy tightening before year end should be expected, Fischer said Yellen’s comments were “consistent with answering yes” to both questions, albeit still data-dependent.
“I thought what Fischer said was a driver” of the currency moves, said Naoki Fujiwara, fund manager at Shinkin Asset Management.
The pan-European Stoxx Europe 600 index rose half a percent on Friday, with solid German and French consumer confidence data and Yellen’s confidence in the USA economic outlook during her remarks at Jackson Hole supporting markets.
Most Asian share markets slipped while the U.S. dollar held firm.
But they proved a boon for the United States currency, with the dollar index, which tracks the greenback against six global peers, jumping 0.8% on Friday.
The dollar’s strength pushed commodity prices lower. USA crude futures fell 0.9% to $47.22 in early Asian trade.
Platinum was up 0.29 per cent at $1,070.60 per ounce.
“It wasn’t so much what Yellen said, but what Fischer said afterward that really moved markets”, said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.
Hong Kong’s Hang Seng Index was last down 0.4%, while Singapore’s Straits Times Index was off 0.7%. It held steady at 95.561 in early trading on Monday. Shares of the auto giant were last down 1.1%.
The German DAX gained 0.6 percent, France’s CAC 40 index added 0.8 percent and the U.K.’s FTSE 100 advanced 0.3 percent.
Gold prices retreated to a month’s low after the Fed’s comments, even though the broad outlook for the precious commodity remains bullish, due to demand for safe-haven assets on debt worries in Italy, as well as the upcoming us elections.
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On Friday, the preliminary gross domestic product (GDP) increased 1.1 percent in the second quarter of 2016, well below market expectations for a +1.2 percent result, from the revised +0.8 percent reading seen in the first quarter of 2016 (previous was +1.1 percent).
