STOCKS | Barclays Says Japan Rate Hike Is Nearly Certain After Fed Tightening

Asian currencies weakened on Thursday after the U.S. Federal Reserve delivered its first rate hike in three years, putting more pressure on the Bank of Japan as markets awaited the size of its monetary tightening adjustment. According to Sina Finance, the Fed raised its benchmark rate by 25 basis points and signaled it would continue taking steps to curb inflation. The dollar broke above 156 yen in Thursday trading, while the yen fell more than 1.1% after the Fed decision. The dollar also rose 0.7% against a basket of major trading-partner currencies, and short-term U.S. Treasury yields moved higher. On Wednesday, the 2-year U.S. Treasury yield rose 0.07 percentage point to 4.74% before edging down to 4.71% on Thursday. The Korean won fell 0.3% on Thursday, with the dollar at 1,380 won, while the Indian rupee weakened to 96.07 per dollar, its lowest level since late July. The moves erased some of the gains Japan and the United States had made in recent weeks to support the yen, and markets are now focused on the Bank of Japan's rate decision on Friday. Market expectations are for the Bank of Japan to raise rates by 25 basis points to 1.25%, which would be the highest level in three decades. Mituul Kotecha, head of Asia foreign exchange and emerging markets macro strategy at Barclays, said current market conditions have left Asian currencies in a defensive position. He said the Fed's decision made a Bank of Japan rate hike "almost certain." Rising energy prices added further pressure on Asian currencies. Brent crude broke above $100 a barrel this month and was trading near $105.8. Abbas Keshwani, Asia macro strategist at RBC Capital Markets, said the region was facing a double hit because most Asian economies are energy importers and the Fed's tightening cycle is drawing in dollars.