Asian stocks fell and the dollar surged to a three-week high versus the yen after the U.S. Federal Reserve ended its massive quantitative easing programme, as expected, but laced its economic assessment with a tinge of optimism. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.6 percent.
In a statement on Wednesday after a two-day meeting, the Fed ended its quantitative easing programme of bond purchases. At its peak, the programme pumped $85 billion a month into the financial system. The Fed did retain its basic guidance that overnight borrowing costs would remain near zero for a “considerable time”.
But it dropped the characterisation of the U.S. labour market slack as “significant” in a show of confidence in the economy’s prospects, the part markets perceived as containing a slightly hawkish bent by spelling a turn towards a new regime. “The Fed was widely expected to end quantitative easing (QE) but barely anyone anticipated such a significant upgrade to their labour market assessment,” Kathy Lien, managing director at BK Asset Management in New York, said in a note to clients.
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