Asian central banks, governments breathe sigh of relief after Fed lifts off

SYDNEY (Reuters) - Asian governments and central bankers breathed a collective sigh of relief on Thursday after currencies edged up and stocks rallied rather than recoiled at the U.S. Federal Reserve's decision to raise interest rates.
The prospect of the first hike in U.S. rates in almost a decade had kept emerging markets on edge in the weeks leading up to the Fed's decision, amid fears investors would redirect capital to higher-yielding U.S. debt in a fresh blow to their shaky economies.
However, an initial rally smoothed the brows of Asian central bankers who were the first to respond to the hike as U.S. policymakers sought to end an era of ultra-low rates that followed the global financial crisis.
"It is a relief that even despite the Fed rate hike, turbulence in global financial markets has not been large," said South Korean Vice Finance Minister Joo Hyung-hwan.
The more composed initial reaction was aided by the fact the Fed had clearly flagged the move in advance, and also said the pace of tightening would be gradual - an important signal for many asset markets adjusting to less stimulus after years of flush Fed liquidity.
However, Citibank's Asian economic team said while equities and credit market had perked up, the response of commodity market suggested caution.
"We have long argued that early signs of growth in emerging markets would be seen in commodity markets, so we take heed that neither energy nor metal prices shared the optimism of the equities and credit markets," the analysts said in a report.
Hong Kong's top central banker, who was obliged to immediately match the Fed's hike under the Chinese-run city's peg to the U.S. dollar, said he expected only a modest outflow of capital as a result of the Fed's move.
China's central bank also added to the reassuring mood, penciling in economic growth of 6.8 percent for next year in a working paper released on Wednesday, down only slightly from an expected 6.9 percent this year.
A senior researcher at an official Chinese think tank chimed in, saying the hike would not lead to major economic disruption.
Zeng Gang, director of the Chinese Academy of Social Sciences banking research division, told the official People's Daily paper that as the rate rise had been widely expected, it had been priced into markets and the announcement impact was limited.
Data showing drops in exports from Japan and Singapore, including big falls in shipments to China, sounded some of the few sour notes on Thursday, but Tokyo too voiced relief that emerging markets were taking the U.S. rate hike in their stride.

EUR/USD falls mildly, after the Fed approves first rate hike since 2006

Source : Investing.com
EUR/USD fell mildly on Wednesday reversing territory late in the session, after the Federal Reserve met market expectations by approving its first interest rate hike in nearly a decade.
The currency pair traded in a broad range between 1.0866 and 1.1011 before settling at 1.087, down 0.0042 or 0.39% on the session. With the minor losses, the euro fell to its lowest level against the dollar in a week. The dollar is up slightly against the euro since plunging by more than 3% on December 3 after the European Central Bank rattled global foreign exchange markets by only implementing limited easing measures to its comprehensive asset-purchasing program.
EUR/USD likely gained support at 1.0538, the low from Dec. 3 and was met with resistance at 1.1496, the high from Oct. 15.
In a unanimous decision, the Federal Open Market Committee (FOMC), lifted its benchmark Federal Funds Rate by 25 basis points to a range between 0.25 and 0.50%. Before Wednesday's decision, the FOMC had held short-term interest rates at near zero levels for 56 consecutive meetings, a streak which dated back to December, 2008. In making its decision, the FOMC judged that it has seen considerable improvements in labor market conditions while it is reasonably confident that inflation will rise over its 2% objective over the next several years. The FOMC lowered short-term rates to a zero-bound range seven years ago in an effort to stimulate the economy months after the start of the Financial Crisis.
“This action marks the end of an extraordinary seven-year period during which the federal funds rate was held near zero to support the recovery of the economy from the worst financial crisis and recession since the Great Depression,” Fed chair Janet Yellen said at a press conference in Washington.
Although Yellen continued to express concern with the current pace of inflation, she reiterated that she expects temporary factors restraining price increases to abate when crashing oil prices stabilize and a stronger dollar levels off. The dollar opened on Wednesday up by approximately 8% against a basket of major currencies. A rate hike is largely viewed as bullish for the dollar, as investors pile into the greenback in order to capitalize on higher yields.
Despite instituting moderate easing measures at its Governing Council meeting earlier this month, the ECB cut rates on overnight deposits further into negative territory at minus 0.3%. While Yellen said Wednesday that she doesn't think it will be a tool that the Fed will need to use in the near future, she did not discount the possibility of studying its effects.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, surged by more than 0.80% to settle at 98.29. Yellen also noted that although a number of countries throughout the world have suffered slowing growth due to the rout in commodity prices, she added that the Fed has seen a rebound in Emerging Markets of late. On Wednesday, the iShares MSCI Emerging Markets Index (N:EEM) ETF gained 0.65 or 2% to 33.20.
Yields on the U.S. 10-Year inched up one basis point to 2.28%, while yields on the {{23693|Germany 10-Year} }rose four basis points to 0.68%.

Crude rises after U.S. fed rate hike, gains limited

TOKYO (Reuters) - Crude futures rose in Asian trade on Thursday recouping some of the losses from the previous session, when they fell sharply after the Federal Reserve raised rates and official figures showed a surprise build in U.S. inventories.
West Texas Intermediate for January delivery , the front-month contract, rose 17 cents to $35.69 a barrel by 0100 GMT after finishing settled down nearly 5 percent on Wednesday.
Brent crude for February delivery (LCOc1), the front-month contract from Thursday was up 17 cents at $37.56. The global benchmark fell $1.34 to $37.39 the previous session.
U.S. crude stocks increased last week as imports into the Gulf Coast rose, data from the Energy Information Administration (EIA) showed on Wednesday, surprising analysts who expected inventories to decline.
The EIA data showed crude inventories rose 4.8 million barrels last week to near record highs, while analysts in a Reuters poll had forecast a drop of 1.4 million barrels.
Adding to the overall bearish global picture, OPEC producers see scant chance of a significant rise oil prices in 2016 as extra Iranian production could add to the ongoing glut and the prospect of voluntary output restraint remains remote.
The U.S. Fed hiked interest rates for the first time in nearly a decade on Wednesday, a sign it believes that the U.S. economy had largely overcome the calamity that was the 2007-2009 financial crisis.
Higher U.S. rates typically support the dollar, making oil and other commodities denominated in the greenback more expensive, undermining demand.

Shares in Asia gain after Fed hike, Tokyo jumps

Source : Investing.com 
Asian shares followed the U.S., gaining on Thursday after the Federal REserve hiked interest rates for the first time in nearly a decade.
The Nikkei 225 jumped 2.08%, while the S&P/ASX 200 rose 1.33%% and the Shanghai Composite edged 0.17% higher. In Asia, Japan reported its trade balance for November was a deficit of Y380.0 billion, narrower than the deficit of ¥446 billion seen.
Overnight, U.S. stocks surged on Wednesday afternoon after the Federal Reserve calmed markets by approving its first interest rate hike in nearly a decade, sending a signal to investors that the economy is close to recovering fully from the devastating Financial Crisis of 2008.
In a unanimous vote, the Federal Open Market Committee (FOMC) lifted its benchmark Federal Funds Rate by 25 basis points to a range between 0.25 and 0.50%. Before Wednesday's decision, the FOMC had held short-term interest rates at near zero levels for 56 consecutive meetings, a streak which dated back to December, 2008.
“This action marks the end of an extraordinary seven-year period during which the federal funds rate was held near zero to support the recovery of the economy from the worst financial crisis and recession since the Great Depression,” Fed chair Janet Yellen said at a press conference in Washington.
The major indices were relatively unchanged immediately after the announcement, until a surge in financial stocks led to a sharp rally just before the close. The Dow Jones Industrial Average added 224.18 or 1.28% to 17,749.09, while the NASDAQ Composite index gained 75.77 or 1.52% to 5,071.13, as investors on Wall Street took a collective sigh relief after waiting more than a year for lift-off, following the conclusion of the Fed's comprehensive quantitative easing program.
The S&P 500 Composite index, meanwhile, rose 29.66 or 1.45% to 2,073.07, as stocks in nine of 10 sectors closed in the green. Stocks in the Utilities, Telecommunications and Consumer Goods industries led, each gaining more than 1.75% on the session.