Asian markets down on Fed comments

<p>The US Federal Reserve is planning to increase interest rates soon.</p>

Asian markets were down across the board today (March 20th) on the back of the latest suggestion interest rates could soon be increased in the US.

After chair of the Federal Reserve Janet Yellen stated that rates might be put up by the body next year, markets such as the Nikkei were down.

Ms Yellen took over as chair of the Fed towards the end of last year, replacing Ben Bernanke in the role. She was the preferred candidate of US president Barack Obama to take the leadership of the body.

The Fed has continued to wind down its bond-buying programme and Ms Yellen suggested interest rates could be increased from zero per cent six months after that scheme has come to an end.

Markets down

These comments from the Fed's chair hurt Asian markets, with the Nikkei down by 1.65 per cent over the course of the session following her press conference. Hong Kong's Hang Seng and the Shanghai Composite were also down on the back of Ms Yellen's statement, with each suffering from a loss of more than one per cent.

Peter Redward, of Redward Associates, suggested that the impact of an increase to US interest rates is not going to be the same in Asia as it will be in some of the world's emerging markets.

"We're going to see the type of reaction we've seen in other emerging markets which means interest rates are probably going to climb as well," he told the BBC, suggesting the first Asian country to increase interest rates could be the Philippines.

Mr Redward added: "The issue for Asia is that the US isn't the locomotive for this region that it once was. The rise of China and the relative decline of the US means that it just isn't going to pull the region forward like it has in the past."

A rise in US interest rates could put pressure on the Bank of England's Monetary Policy Committee to increase the UK's base rate, which has stood at a record low of 0.5 per cent for the last five years.

Learn about the Asian markets and CFD trading at City Index

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.