RECORD PLUNGE FOR RUPEE
Wall Street’s three main indexes tanked, with the Nasdaq taking the heaviest blow as tech firms – which are susceptible to higher rates – were battered, while European markets were also hammered.
Asia followed suit, with Hong Kong, Tokyo and Seoul down more than three per cent, while Mumbai, Jakarta, Taipei, Jakarta and Wellington were off more than two per cent. Shanghai, Singapore, Manila and Bangkok were also well down.
Goldman Sachs analysts said in a note: “At some point financial conditions will tighten enough and/or growth will weaken enough such that the Fed can pause from hiking.
“But we still seem far from that point, which suggests upside risks to bond yields, ongoing pressure on risky assets and likely broad US dollar strength for now.”
The dollar continued to push higher on expectations for a sharp increase in US rates, hitting a 24-year peak of 135.19 yen while it also broke above 78 Indian rupees for the first time.
The greenback was also at multi-year highs on the euro and sterling.
“The ongoing backdrop to the yen’s fall is the growing gap between long-term interest rates in Japan and the United States,” Takahide Kinouchi, executive economist at Nomura Research Institute, said in a recent commentary.
And as higher oil prices fuel US inflation, “expectations are growing stronger that aggressive US monetary tightening will continue for the time being, causing US yields to rise further”.
Oil prices sank, extending Friday’s retreat, on demand concerns as China sticks to an economically damaging zero-COVID policy to fight a fresh outbreak of the disease.
Parts of Shanghai were put back into lockdown and officials carried out mass testing on millions of people, just weeks after lifting strict measures in the country’s biggest city.
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