Asia equities rally on dovish Fed minutes

HONG KONG: Malaysia’s ringgit and Indonesia’s rupiah led an emerging market rally against the dollar yesterday while Asian equities also pushed higher after minutes from the Federal Reserve’s latest policy meeting suggested it could keep borrowing costs at record lows into next year.

Energy firms tracked a surge in oil prices as hopes for crude demand picked up and ongoing crises in the Middle East fanned supply worries.

The gains across assets come after a painful July-September quarter that saw trillions wiped off global markets owing to worries about the state of China’s economy and an expected US interest rate hike. On Thursday, minutes from the Fed’s closely watched September policy board meeting showed some members were concerned about China’s struggles, the strong dollar and persistently low inflation.

“Recent global and financial market developments might restrain economic activity somewhat as a result of the higher level of the dollar and possible effects of slower economic growth in China and in a number of emerging market and commodity producing economies,” the minutes said.

The minutes lit a fire under struggling emerging market currencies, with the ringgit surging 3.3% and rupiah 3.4% higher. The ringgit has soared about eight percent this week, its best five-day run in 17 years. Talk of a Fed rate rise has hurt emerging markets --particularly struggling Malaysia and Indonesia --as dealers have for months been withdrawing cash to the United States looking for better, safer returns.

The South Korean won climbed 1.2%, the Australian dollar was 0.4% higher, the Thai baht edged up 0.5% and the Taiwan dollar gained 0.9%.

Share markets also extended a run of gains as confidence returns to trading floors, with most regional exchanges more than one percent higher. Tokyo jumped 1.64% by the close and Sydney ended 1.33% higher, while Shanghai ended 1.27% up and Hong Kong gained 0.46%.

Crude prices have risen by more than a quarter since hitting a six-year low in August as worries about a stronger dollar, a supply glut and weak demand ease.

The market got a shot in the arm Thursday when the head of the Opec cartel of crude producers --which represents almost half of output --said demand will rise more than projected this year.

Yesterday, US benchmark West Texas Intermediate was up 1.8% and Brent was 1.4% higher, with continuing strife across the oil-rich Middle East providing support.