The fall in US equity markets overnight combined with the Fed’s additional $10bn taper to drive deeper risk aversion in Asia. The Nikkei is down 2.8%, the Hang Seng Index has fallen 0.8% and most equity markets in Southeast Asia are off about 0.9% – 1.0%. Stock markets in Taiwan and Korea are closed today for the lunar new year holiday.
The Kiwi has been the main mover among developed market currencies, dropping 1.2% against the USD to 0.8179 and 0.7% vs. the AUD to 1.0678 in the wake of the RBNZ’s failure to raise its policy rate. In contrast, EURUSD is essentially steady at 1.3651 and USDJPY has traded a tight range around 102.2 after dropping in New York trading. Almost all EM Asia currencies have weakened against the dollar, led by a 1.0% fall in the KRW to 1079.37 and a 0.5% gap weaker in INR to 62.7950. The lone standout has been USDSGD, which is 0.1% lower.
The US 10yr Treasury yield is flat at 2.6877% after its fall in New York. Asian yields are generally lower in Asia, led by Hong Kong and Singapore, where rates have dropped 3 – 7bps. India has been the exception, with yields up 4 – 8bps on concerns that the weaker rupee might trigger further policy rate hikes.
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Credit Suisse