“Moreover, the response by the dollar and the interest rate markets suggest monetary policy still matters”.
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The Nasdaq Composite.IXIC dropped 0.9 percent to 4,696.38.
The Japanese yen was down 0.99 per cent versus the greenback at 110.20 per dollar and the euro fell 0.85 per cent to $1.1215. Hong Kong’s Hang Seng index rose 0.8 percent to 19,852.20.
Gold was put under extensive pressure as minutes of the Fed’s April meeting, released on Wednesday, showed that most regulators thought a June rate hike was appropriate, given continued improvement in the USA economy. Dudley, considered one of the most dovish members of the Fed, said he is “pleased” the possibility for a June hike is reflected in financial markets.
“The Fed has regained the upper hand here”, strategists at Brown Brothers Harriman said. It’s also reflective of what policymakers, including Dennis Lockhart, have been saying, especially on Tuesday in Washington when Lockhart’s comments triggered a sell off in markets and a surge in U.S. interest rates.
Asian markets fell into a sea of red as the recent Fed interest rate update on the minutes of the Central Bank policy meeting were released on Wednesday.
Markets were pricing in a 32 per cent chance the Fed would raise rates in June, according to the CME FedWatch tool, up from 15 per cent on Tuesday.
Gold fell to a three-week low as Federal Reserve minutes showed policy makers may raise US interest rates as early as next month.
“Despite the increasing certainty (of a rate move), risk appetite stayed on the sidelines. USA and European equities were sold”, Bernard Aw, market strategist at IG in Singapore, wrote in a note.
Commodities also tried to rally-up despite the worries over interest rate hikes, with Bloomberg reporting that the dollar was “retreating against higher-yielding currencies”.
The dollar rose 0.3 per cent against a basket of currencies, adding to gains after hitting its highest point since late March on Wednesday. Australia’s S&P/ASX 200 gained 0.5 percent to 5,351.30. Higher rates diminish the appeal of high-dividend companies to investors seeking income. Meanwhile, the S&P/TSX composite index in Toronto ended the day little changed as it found lift from materials, gold and consumer staples stocks. It was down 0.9% for the week.
The sterling advanced as strong retail sales data reduced chances of an interest rate cut by the Bank of England, and polls showed growing support for Britain to remain in the European Union.
The pound was holding steady at $1.4602 after touching a three-and-a-half-week high of $1.4663 overnight.
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Investors will also pay attention to news from the 2-day G7 meeting among world finance ministers and central bankers which kicks off in Japan on Friday.
