HONG KONG (AFP) - Comments from top Federal Reserve officials suggesting an interest rate hike is still on this year pushed the dollar and Asian stocks higher on Tuesday (Sept 22), as they sought to sooth concerns about the state of the global economy.
Asian stock markets also advanced as their initial fears were subdued. Hong Kong rose 0.76 per cent, Sydney gained 0.63 percent, Seoul was 0.33 per cent higher and Shanghai climbed 1.02 per cent.
The Straits Times Index was trading 0.46 per cent higher at 2,895.48 as of 11:55 am.
Shanghai stocks enjoyed a third straight gain as President Xi Jinping prepares to start a closely watched visit to the United States, with many dealers hoping he will sign several trade agreements.
The US dollar rose against regional emerging currencies. South Korea's won slipped 0.21 per cent, the Thai baht eased 0.35 per cent, the Taiwan dollar retreated 0.47 per cent and the Malaysian ringgit was 0.23 perc ent lower. Singapore's dollar lost 0.25 per cent.
The euro weakened against the US dollar and yen as the European Central Bank contemplates widening its stimulus programme in a bid to boost the eurozone economy.
World markets had tumbled on uncertainty about the global outlook after the US central bank on Thursday held off announcing a rise, with its head Janet Yellen citing the threats caused by China's economy as a key reason for the decision.
The news sparked fears about the global outlook and also about the strength of the US economy itself, which has been steadily getting back on a recovery track.
However, in an attempt to temper the impact of the news, several regional presidents have since sought to reassure dealers, saying they thought the US was in a fit enough state to see a first rate rise by the year's end.
Fed Bank of Atlanta President Dennis Lockhart said despite recent volatility in world markets - which followed China's surprise yuan depreciation in August - he was still confident of a rate lift-off before 2016.
"As things settle down, I will be ready for the first policy move on the path to a more normal interest-rate environment," he said in a speech in Atlanta. "I am confident the much-used phrase 'later this year' is still operative."
His comments were in line with those of two other presidents who at the weekend put the case for an increase.
All three main indexes on Wall Street ended higher, as did the US dollar.
However, Tim Schroeders, a portfolio manager at Pengana Capital in Melbourne, told Bloomberg News: "While we may see a moderately positive day for Asian equities following gains in US equities, its hard to see such gains being sustained amid concerns over Fed policy.
"The reluctance of the Fed to move from very accommodative policy settings seems to indicate how fragile the US economy can be." There remain deep fears in Asia about a tightening of US monetary policy owing to a likely flight of much-needed capital as traders move into the United States in search of better returns.
This would in turn put pressure on Asian central banks to lift rates themselves in a bid to protect their currencies, at a time when they are struggling to kickstart tepid growth at home.
