Asia stocks slip on growing Fed hike bets.
Asian stocks fell broadly on Monday as investors turned cautious after Federal Reserve Chair Kevin Warsh’s hawkish comments revived expectations for a U.S. interest-rate hike, while a fresh escalation in U.S.-Iran fighting pushed oil prices higher and added to inflation concerns.
Wall Street ended lower on Friday after Warsh’s speech. U.S. stock index futures also fell in Asian trading on Monday.
South Korea’s KOSPI dropped 1.5%, with chip heavyweights Samsung and SK Hynix among the biggest drags.
Japan’s Nikkei 225 fell 1.1% while the broader TOPIX index eased 0.5%, with investors also watching the yen’s USD/JPY pair, which briefly climbed above 160 yen.
The selling followed Warsh’s remarks at the Jackson Hole symposium on Friday that the Federal Reserve would have more work to do if policymakers were not confident underlying inflation was returning to its 2% target.
Markets subsequently raised the probability of a September rate increase to 60%, from roughly 35% before his speech.
Gold slips as hawkish Fed outlook.
Gold prices reversed early gains to fall on Monday, as investors reassessed the Federal Reserve’s rate outlook following Chair Kevin Warsh’s hawkish inflation message.
Rising oil prices added to concerns, although the broader fiscal backdrop behind gold’s August rally offered some support. Despite Friday’s selloff, gold remains about 10% higher in August and is heading for its strongest monthly gain since January.
At 01:49 ET (05:49 GMT), XAU/USD fell 0.4% to $4,436.57 an ounce, while Gold Futures declined 1% to $4,486.19. XAG/USD rose 0.2% to $66.53 an ounce, while XPT/USD fell 0.8% to $1,809.07. The US Dollar Index fell 0.1% to 99.62.
Gold fell 3.2% on Friday, its biggest daily decline since early June, after Warsh said the Federal Reserve still has work to do to bring inflation back to its 2% target.
His comments pushed investors to raise expectations for another rate increase, with markets now pricing roughly a 57% probability of a September hike, according to CME’s Fedwatch tool.
Asian currencies mixed as yen hovers near 160.
Asian currencies traded mixed on Monday as the Japanese yen hovered near the closely watched 160-per-dollar level, while a fresh escalation in the U.S.-Iran conflict drove oil prices higher and reinforced a broader risk-off mood across regional markets.
The U.S. dollar was broadly firm after Federal Reserve Chair Kevin Warsh’s hawkish comments pushed markets to price in a higher chance of a September rate hike. The implied probability rose to about 57%, while two-year U.S. Treasury yields climbed to a more than one-month high of 4.33%. The U.S. Dollar Index was around 99.60 after rising 0.6% on Friday.
Japanese yen’s USD/JPY pair was around 159.83, keeping the local unit close to the 160 level it weakened through on Friday. Investors widely view a break further above 160 yen per dollar as increasing the risk of Japanese authorities intervening to support the currency.
The yen’s return toward 160 per dollar has put the possibility of further Japan-U.S. intervention back in focus, after the two countries intervened jointly in late July.
Yen pressure returns as intervention risk rises
U.S. Treasury Secretary Scott Bessent said the yen’s recent moves were “pretty well contained” and said he plans to meet Bank of Japan Governor Kazuo Ueda at the G20 gathering in North Carolina. His comments suggest the latest weakness has not yet reached the disorderly level that could prompt another round of coordinated intervention.
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