Investors across Asia, seeking respite from the relentless surge in US bond yields and the strengthening dollar, were disappointed by Federal Reserve Chair Jerome Powell's remarks on Tuesday. Powell's cautious tone, suggesting prolonged inflationary pressures and a need for sustained higher interest rates, has likely left Asian investors on edge as they prepare for Wednesday's trading session.

Powell's acknowledgment that recent data does not instill greater confidence and indicates a prolonged timeline to achieve inflation targets underscores the challenges ahead. This "higher for longer" narrative extends beyond interest rates to encompass the US dollar, Treasury bond yields, and financial conditions indexes. This prolonged scenario presents a less-than-ideal backdrop for Asian assets, already grappling with mounting pressure.

Chinese stocks declined by 1% on Tuesday, while Japanese and other Asian equity benchmarks experienced sharper tumbles.

Meanwhile, the currencies across the ASEAN region are also on a downward spiral, worsened by the yen falling towards 155.00 per dollar and the PBoC possibly allowing the Yuan to weaken.

Much to the dismay of central bankers across the region, Tokyo has yet to take any measures to address the yen's decline. This lack of action could potentially worsen the regional currency slide, as the market may see the Ministry of Finance's verbal statements as empty rhetoric. Finance ministers and central bankers attending the IMF and World Bank Spring meetings are expected to discuss the dollar's strength to avoid a full-blown currency crisis at all costs.

Although the US benchmark's attempt at consolidation may have some potential benefits for the market, any optimism that arises from this could be dampened by the ongoing tensions in the Middle East and mixed results from Q1 earnings in the United States.

SPI Asset Management provides forex, commodities, and global indices analysis, in a timely and accurate fashion on major economic trends, technical analysis, and worldwide events that impact different asset classes and investors.

Our publications are for general information purposes only. It is not investment advice or a solicitation to buy or sell securities.

Opinions are the authors — not necessarily SPI Asset Management its officers or directors. Leveraged trading is high risk and not suitable for all. Losses can exceed investments.

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