South Korea’s won led declines in Asian currencies after the Federal Reserve said it will reduce stimulus that has fueled demand for emerging-market assets. Government bonds were mixed.
The Fed said yesterday it will cut its monthly bond purchases to $75 billion from $85 billion amid an improved outlook for the job market in the world’s largest economy, while pledging to hold interest rates close to zero. The MSCI Asia Pacific Index of shares rose for a third day as U.S. policy makers also reduced their projection for unemployment.
“It’s probably just a short-term reaction to the tapering announcement, but I don’t see a sharp sell-off from here,” said Shigehisa Shiroki, chief trader on the Asian and emerging-markets team at Mizuho Corporate Bank Ltd. in Tokyo. “Stocks remain solid and short-term rates are not rising so much. The U.S. economic recovery would benefit Asia and I am not so bearish on the region’s currencies.”
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