Asian shares fall as Fed may slow down rate hikes

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Asian shares fall as Fed may slow down rate hikes

A man wearing a protective mask walks past an electronic board displaying the Shanghai Composite Index, Nikkei index and Dow Jones Industrial Average outside a brokerage in Tokyo, amid the coronaviruses disease COVID 19 outbreak.

HONG KONG Reuters- Asian shares fell on Thursday, in line with Wall Street's losses, as the prospect of a less aggressive Federal Reserve has still set the U.S. central bank on a path for interest rates to stay higher for longer.

The dollar went up overnight after the July minutes of the Fed pointed out a steady course of rate hikes ahead.

After the US stock market ended the previous session with mild losses, MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.22%. The index is up 1.3% this month.

Hong Kong's Hang Seng Index was down 0.45%, while China's blue chip CSI 300 was off 0.33%.

The Federal Reserve minutes for its July meeting showed that it was contemplating paring back the pace of future rate hikes in line with a slowdown in inflation, but there was little evidence that pressures were easing.

The minutes showed that the U.S. tightening cycle could be less aggressive than forecast, but investors said that Fed policymakers were committed to raising rates until prices come under control.

The latest Fed meeting minutes, which showed that the central bank would continue its aggressive hiking campaign until it can tame inflation, Ord Minnett analysts wrote in a research note.

At the same time, the Fed indicated that it could slow down the speed of its tightening, while also acknowledging the state of the economy and risk to the downside for gross domestic product growth. The yield on the benchmark 10 year Treasury notes rose initially in Asian trade but fell to 2.8749% compared to its U.S. close of 2.895% on Wednesday.

The two-year yield, which has gone up with traders' expectations of higher Fed funds rates, was 3.2681% compared to a U.S. close of 3.295%.

Following the minutes' release, higher yields helped strengthen the dollar. The U.S. dollar index, which measures the dollar against a basket of six major currencies, is up about 0.8% this week, putting the brakes on a pullback that began about a month ago.

The U.S. dollar got back onto a rallying tack and did so with some force, making this week's gains sizeable, according to CBA analysts.

The world economy tends to be a slower growing place, favoring the dollar. The Dow Jones Industrial Average fell by 0.5% to 33,980 on Wednesday. The S&P 500 lost 0.72% to 4,274 at 32. The Nasdaq Composite dropped 1.25% to 12,938 on 04 and the Nasdaq Composite. The dollar was up 0.04% against the yen to 135.06. It is still a distance from its high this year of 139.39 on July 14.

U.S. crude fell by 0.64% to $87.53 a barrel. Brent crude was down 0.52% to $93.16 per barrel.