The three major stock indexes fell on the New York Stock Exchange, Suqian, Jiangsu Province, China, Jan. 4, 2023.
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The dollar found support in Asia on Wednesday after stubbornly high U.S. inflation suggested interest rates are going to remain high for longer than investors had expected.
Headline CPI was 0.5% in January, mostly due to higher rental and food costs. That was in line with forecasts, though the annual figure of 6.4% was a bit more than expected and bets on rate falling toward the end of 2023 were being quickly unwound.
The U.S. dollar climbed to a six-week high of 133.30 yen on Tuesday and sat not far below that at 133.11 early in the Asian afternoon. Down 0.6% to $0.6300, the New Zealand dollar was setting to test support around $0.6270.
The Australian dollar AUD=D3 fell 0.7% to $0.6935. China’s yuan hit a one-month low at 6.8463 to the dollar. Sterling and the euro each fell about 0.2%.
The moves seem to be firmly arresting a steep slide in the dollar that ran through January.
“Market hopes of rapid disinflation continue to recede,” said Bank of Singapore currency strategist Moh Siong Sim.
“The risk is that the Fed might nudge up its dot plot (rate projections) a tad at the March meeting.”
In December, Federal Reserve board members’ median projection was for a peak in rates at 5.1% this year, but interest rate futures markets now price a peak above 5.2% and Fed officials struck a hawkish tone on Tuesday.
“We must remain prepared to continue rate increases for a longer period than previously anticipated,” said Dallas Fed President Lorie Logan. Longer-run Fed funds futures have sold sharply and to imply rates persisting above 5% through 2023.
Australia’s central bank chief Philip Lowe told members of parliament that rates still had a way to rise Down Under.
Later in the day British inflation is due, with a consensus forecast for annual headline CPI at a whopping 10.3% – more than five times the Bank of England’s 2% target.
U.S. retail sales figures are also due and will gauge how the U.S. consumer is bearing the 450 basis points of Fed rate hikes in the past year.
