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Asian markets take breather after surge on Fed move

September 17, 2012

HONG KONG: Asian markets were mixed in early trade today following strong advances at the end of last week after the Federal Reserve announced a huge stimulus plan to boost the US economy.

The euro eased slightly as forex dealers took a breather after the single currency made healthy gains Friday following the unveiling of the open-ended bond-buying programme.

Hong Kong rose 0.62%, Sydney added 0.26%, Seoul eased 0.13% and Shanghai was flat.

Tokyo and Kuala Lumpur were closed for public holidays.

The Fed said on Thursday it would start a third programme of bond-buying, by purchasing US$40 billion a month in mortgage-backed bonds, known as quantitative easing (QE3), and would keep the scheme in place until it saw substantial improvement in the jobs market.

It also said it would extend its “Operation Twist” scheme of selling short-term debt and buying long-term bonds with the proceeds in order to keep long-term interest rates as low as possible.

“The big question is how long this Fed-inspired rally will continue as QE3 was the last bazooka to be used in (its) arsenal,” says Jason Hughes, analyst at IG Markets Singapore.

“When the smoke clears, there is a lot of uncertainty over what such stimulus can do for the global economy,” he told Dow Jones Newswires.

The Fed move came a week after the European Central Bank said it would buy unlimited quantities of debt from under-pressure eurozone nations such as Spain and Italy in a bid to cut their borrowing costs, which had hit danger levels.

On Wall Street on Friday the Dow rose 0.40%, the S&P 500 added 0.40% and the Nasdaq gained 0.89%.

Thursday’s Fed announcement, which dealers welcomed as going further than expected because it is open-ended, also gave a huge boost to the euro, although it weakened a little today.

In early trade today the single currency bought US$1.3120, compared with US$1.3127 late Friday in New York, while it was at 102.72 yen from 102.90 yen.

However, it is still well up from the US$1.2916 and 100.36 yen before the Fed move.

The dollar bought 78.27 yen Monday, compared with 78.37 yen in New York.

On oil markets, New York’s main contract, light sweet crude for delivery in October, gained four US cents to US$99.04 and Brent North Sea crude for November delivery added 12 US cents to US$116.78.

Gold was at US$1,775.80 at 0200 GMT compared with US$1,773.30 on Friday.

- AFP


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