U.S. And Asian Stocks Decline On FED Uncertainty

Asian stocks slipped to their lowest level in 2013, hit by uncertainty when the U.S. Federal Reserve (FED) would begin scaling down its massive stimulus program. Since 2008, the FED has injected 2.5 trillion dollars into bonds to boost the economy. The increased liquidity has mainly benefited U.S. stocks which have reached new highs, but also led to an inflow of U.S. funds into Asian and other markets. There are now increased worries, especially in Asia, about funds flowing out of the region.

Over the past few days, this trend has been reflected in a stronger Japanese Yen (JPY). Foreign funds have, for the last few months, been injected into a rapidly increasing and profitable Japanese stock market. Foreign capital is now taking profit, and selling a Yen that has increased 4% in the last few days in relation to the USD. The USD/JPY fell below 100 on Monday, recovered early during Wednesday’s session and later dipped back to 99.2 Yen to a Dollar.

U.S. stocks ended even lower on Tuesday, resuming their recent decline, as investors sold growth-oriented sectors on speculation the Federal Reserve may slow down the pace of its economic stimulus. The indexes have fallen 2 percent from their peak on May 22 as investors take profit. The Dow Jones was down 0.50 % at 15 177. A top U.S. official, critical to the bond buying program, yesterday stated that the FED is poised to re-evaluate and possibly make changes to its massive monetary stimulus.

FED Chairman Ben Bernanke, has been consistent in his comments on monetary easing, and stressed that proof of a real turnaround in U.S. economy reflected in an unemployment target of 6.5, which is necessary before making changes. After the disappointing manufacturing data earlier this week, the jobless claims presented on Friday might prove decisive whether the stimulus program is going to be continued until the end of the year.

The Dollar recovered from an early-week selloff on Wednesday, while the Australian Dollar plunged to a 19 month low on the back of disappointing growth data. EUR/USD is at 1.3086 back from a one-month high on 1.3108.There is strong technical resistance at 1.3141. Oil prices are up. NYMEX is at 93.63 and Brent crude trades above USD 103 a barrel.