Asian stock markets were mixed yesterday after the US Federal Reserve signalled the possibility of more interest rate hikes this year.
The Straits Times Index in Singapore climbed 0.37 per cent to 3,547.2 points. The Singapore dollar, meanwhile, strengthened fractionally against the US dollar, moving from $1.3132 to $1.3127.
All eyes are now on the official US jobs data that will be released later today, with another strong reading likely to fuel talk that US borrowing costs would continue to rise.
After Fed chairman Janet Yellen's final meeting on Wednesday, the central bank's policy board said that while it remains below target, the bank expects inflation to move up this year.
It noted that economic growth, investment and unemployment were all going in the right direction.
"There was a subtle and distinct upgrade to the language around the expansion in the US economy, with employment, household spending, and business fixed investment said to 'have been solid'," said Mr Greg McKenna, chief market strategist at CFD and foreign exchange provider AxiTrader.
"It opens the door to four hikes for them, but I don't think they have walked through it," said Mr Michael Gapen, chief US economist at Barclays in New York. "It closes the door to two hikes."
MULTIPLE HIKES
A year ago, the statement read 'only gradual increases', then last March was changed to 'gradual increases', and today was changed again to 'further gradual increases. To us, this looks like a progression from restraining expectations for multiple hikes to reinforcing expectations for multiple hikes.
MR MICHAEL FEROLI, chief US economist for JP Morgan Chase, in a note to clients.
Fed officials have pencilled in three moves this year and investors see more than a 90 per cent chance that they would hike it at their next meeting of the Federal Open Market Committee on March 20-21.
"A year ago, the statement read 'only gradual increases', then last March was changed to 'gradual increases', and today was changed again to 'further gradual increases'," wrote Mr Michael Feroli, chief US economist for JP Morgan Chase, in a note to clients.
"To us, this looks like a progression from restraining expectations for multiple hikes to reinforcing expectations for multiple hikes."
The Fed's comments lifted the US dollar against major currencies, although it is still under pressure as central banks around the world look to tighten monetary policy more in line with the US.
Mr McKenna, however, said that with United States President Donald Trump enjoying a strong economy, the US dollar could pull away again, adding that Mr Trump's plans for big infrastructure spending could fire inflation even more, leading to further rate hikes.
On equity markets, Tokyo rose 1.68 per cent, thanks to a weaker yen and on bargain-buying following a six-day losing streak.
Hong Kong lost 0.75 per cent, Sydney put on 0.97 per cent, while Seoul added 0.08 per cent. Shanghai fell 0.97 per cent.
Regional stocks have mostly fallen this week on profit-taking following a blistering January that saw many indexes hit record or multi-year highs.
Traders in New York provided a positive lead for their Asian counterparts, shaking off a two-day sell-off as they welcomed another round of upbeat corporate earnings.
They were also buoyed by Mr Trump's broadly positive State of the Union address that struck a conciliatory note towards the Democrats and called on their support for a US$1.5 trillion (S$1.97 trillion) infrastructure investment plan.
Dr Yellen will hand over the Fed chairmanship to Mr Jerome Powell, who will be sworn in on Feb 5. He takes the central bank's helm as businesses appear to be increasing investment amid an economic upswing that has broadened to other advanced economies.
Higher capital spending could lift productivity and wages, which could boost inflation if companies can pass these costs to customers in the form of higher prices.
AGENCE FRANCE-PRESSE, BLOOMBERG