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The dollar hit two-year highs against major currencies after strong U.S. jobs data late last week prompted traders to reduce expectations for further interest rate cuts by the Federal Reserve.
The dollar index, which tracks the US currency against the yen, euro and other major currencies, hit its highest level since November 2022, while the pound fell 0.5 percent to $1.216 – a fresh 14-month low.
Stocks in China, India, South Korea and Australia fell on Monday after a U.S. payrolls report showed 256,000 jobs were added in December, dashing expectations for a previous deal and raising concerns that a stronger economy could slow the pace of the Fed’s rate cuts.
Jason Lui, head of Asia-Pacific equity and derivatives strategy at BNP Paribas, said: “People are impressed by the strength of the US economy. “With U.S. interest rates so high, you’re going to have a liquidity drain in Asia, capital flowing to the U.S. or staying there.”
Australia’s S&P/ASX 200 index fell 1.2 percent, while South Korea’s Kospi fell 1.1 percent. India’s Sensex fell 0.8 percent. Japanese markets were closed on Monday.
Sunil Thirumalai, head of Asia equity strategy at UBS, said: “Emerging market stocks traditionally do better when US interest rates are low. “The Fed’s lack of monetary tightening and weaker currencies means less room for Asian depreciation.”
Hong Kong’s Hang Seng index fell 1.2 percent, while mainland China’s CSI 300 fell 0.5 percent.
“The offshore (China) market is still more resilient to external noise,” Lui said, adding that mainland investors are still shifting their money from low-yield savings accounts to the equity market.
Still, mainland Chinese stocks have fallen 17 percent since hitting a peak on Oct. 8 last year, as hopes of Beijing’s bazooka-like stimulus fade and fears of a second term in office for Donald Trump hit the market.
“Some of the stimulus measures were a nice surprise,” said Thirumalai, who said China was still in a bear market. “Expanding the marketing plan to a wider array of consumer goods has come earlier than we thought.”
Oil prices hit a four-month high after the US announcement. Violation of new sanctions on Russian oil on friday.
Brent crude, the global benchmark, rose 1.6 percent to $81 a barrel, while the U.S. benchmark West Texas Intermediate gained 1.7 percent to $77.90 a barrel.
