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Yields rise with the dollar as Fed officials hint at further increases; Asian stocks gain

Image: Reuters Berita 24 English - On Wednesday, Asia-Pacific bond yields increased alongside U.S. Treasury yields, and the dollar appreci...

Image: Reuters

Berita 24 English - On Wednesday, Asia-Pacific bond yields increased alongside U.S. Treasury yields, and the dollar appreciated more after Federal Reserve members indicated that interest rate hikes are far from over.

The safe arrival of U.S. House Speaker Nancy Pelosi in Taiwan, amid warnings from China, which sees the island as a renegade province, lifted yields as demand for the safest assets decreased. The haven yen's decline persisted.

Due to this, stocks in Asia increased despite the overnight decline on Wall Street.

China's blue chips increased by 0.86 percent, Hong Kong's Hang Seng increased by 0.76 percent, and Japan's Nikkei increased by 0.5 percent after hitting a two-week closing low on Tuesday.

Because there was no significant conflict over night, Hong Kong and Chinese equities have recovered around a third of their losses from yesterday, according to Steven Leung, executive director for institutional sales at UOB Kay Hian in Hong Kong.

Investors will however continue to be uneasy owing to the military drills scheduled for after Pelosi's resignation.

Even though raising rates will significantly slow down economic growth, a trio of Fed policymakers signalled on Tuesday that the tightening drive to combat the greatest inflation since the 1980s will not be abated.

Two of them, Chicago Fed President Charles Evans and San Francisco Fed President Mary Daly, are well-known for being doves.

Traders currently estimate that there is a 44 percent likelihood that the Fed will increase interest rates by another 75 basis points at its September meeting.

Benchmark long-term Treasury rates were close to the overnight high of 2.774 percent in Tokyo, hovering around 2.71 percent.

The dollar-yen exchange rate increased by 0.3 percent to 133.57, building on Tuesday's 1.2 percent increase.

The U.S. dollar index, which compares the value of the dollar to those of the yen and five other major peers, increased by 0.04 percent to 106.41, having earlier recovered 1 percent from its overnight decline to a nearly one-month low of 105.03.

Bonds and the yen, which have historically been considered safe havens, lost some of their lustre after Pelosi's travel to Taiwan was so far only received with stern words and Beijing's announcement of live-far military drills, allaying worries of more drastic actions.

After falling by 0.68 percent the previous day, gold nudged up 0.13 percent to $1,762.09 per ounce.

While everything was going on, the recovery in Japan helped MSCI's broadest index of Asia-Pacific equities nudge 0.11 percent higher as investors sought out deals after Tuesday's fall to a two-week closing low.

China's CSI 300 was also making gains after a severe decline the previous day that brought it to an intraday low of over two months. An increase in tech companies, with an index of the shares rising 1.8 percent, was the main driver of gains for Hong Kong's Hang Seng.

But Taiwan's stock benchmark was roughly flat, and Australian stocks fell 0.52 percent, ending a six-day gain streak.

After the S&P 500 fell by 0.67 percent overnight, U.S. stock futures moved up by 0.07 percent.

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