Asian stocks were mixed on Wednesday and the yen hit its highest level against the dollar in a week after the US central bank said it was prepared to pump more money into its economy if necessary.
At its key monthly policy meeting on Tuesday, the Federal Reserve warned that “the pace of recovery in output and employment has slowed” in the world’s biggest economy.
It did not announce any new stimulus measures but did say it “will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery”.
The news pushed the dollar to its lowest level against the yen since Tokyo last week stepped into the currency markets for the first time in six years to rein in the Japanese unit.
In Tokyo morning trade the dollar was at 84.80 yen, down from 85.15 yen in New York late Tuesday. However, the yen is well off a 15-year high of 82.86 struck last week before the government’s intervention.
“The dollar is being dumped as the suggested credit easing spawned expectations of lower interest rates” in the United States, said Daisuke Karakama, market economist at Mizuho Corporate Bank.
The Fed held interest rates at a record low of 0.1 percent on Tuesday.
Focus has now moved to Japan, where investors are waiting to see if the government will again step into the foreign exchange market to prevent the yen strengthening.
“The previous intervention was unexpected, so it’s possible the government will intervene again at the lower 84 yen level,” Takashi Ushio, general manager at Marusan Securities, told Dow Jones Newswires.
A strong currency weighs on the nation’s key exporters as it makes them less competitive abroad and squeezes their repatriated earnings.
Tokyo’s Nikkei slipped 0.12 percent in the afternoon as exporters were sold off. However, Hong Kong was up 0.81 percent and Sydney gained 0.18 percent while Singapore picked up 0.40 percent.
Markets in China, South Korea and Taiwan were closed for public holidays.
The region was given a weak cue from Wall Street, where the Dow posted a weak 0.07 percent gain as the Fed’s comments did little to calm nervous traders.
Markets were also were little moved by better than expected data showing US housing starts jumped more than 10 percent in August.
Construction starts on privately owned homes rose to 569,000 last month, the Commerce Department said, a four-month high for the index.
The euro rose to 1.3275 dollars from 1.3253 in New York, while holding steady at 112.84 yen.
Gold opened at a record high 1,287.50-1,288.50 US dollars an ounce in Hong Kong, up from Tuesday’s closing price of 1,275.00-1,276.00 as traders picked up the safe-haven metal on growing concerns over the global economy.