Key facts
- The U.S. dollar held near a one-month high amid Middle East tensions and anticipation of a Federal Reserve policy decision.
- Asian stocks rebounded from a sharp selloff, with SK Hynix earnings providing some relief.
- Oil prices surged following reports of U.S. forces intercepting Iranian missile launches.
- Markets are pricing in a 33% chance of a 25-basis-point Federal Reserve rate hike.
- The euro and sterling weakened against the dollar, while the yen continued its decline.
The U.S. dollar held near a one-month high as traders awaited a Federal Reserve policy decision, with Middle East tensions and rising oil prices contributing to safe-haven demand. Asian stocks rebounded on Wednesday after a significant selloff, as strong earnings from chipmaker SK Hynix helped to calm fears about the sustainability of the AI-driven rally.
Oil prices jumped in early trading after fresh attacks in the Middle East, with U.S. forces intercepting Iranian ballistic missiles. Brent futures rose 3% to $86.80 per barrel and U.S. West Texas Intermediate (WTI) crude gained over 3% to $81.95. This surge in oil prices puts inflation pressures back in focus ahead of the Federal Reserve's policy decision.
The Federal Reserve is expected to leave interest rates steady, but a growing number of policymakers are concerned about inflation. Traders are pricing in a 33% chance of a 25-basis-point rate hike. The U.S. dollar index was firm, and it edged higher against the yen, which is trading at 40-year lows. Analysts at Citadel Securities believe the market may be underestimating the hawkish shift at the Fed and that higher energy prices could favor a rate hike.
South Korea's KOSPI gained over 1% after sinking more than 10% on Tuesday, while MSCI's broadest index of Asia-Pacific shares outside Japan was 0.8% higher. Japan's Nikkei also gained 1%. Earnings from major tech firms like Microsoft and Meta are anticipated later in the day, serving as a key test for the AI trade.