Asia stocks on back foot as dollar, Treasury yields rise
The US dollar scaled an eleven-month peak on Tuesday and Treasury yields extended their rise as investors braced for higher inflation in the United States amid expectations of fiscally expansionary polices under Donald Trump's presidency. The risks of faster-than-expected Federal Reserve rate increases have dragged on emerging market assets, particularly equities and currencies, which have benefited from large capital inflows. MSCI's broadest index of Asia-Pacific shares outside Japan was flat in early trades while Australian stocks were off 0.5 percent.
"The immediate driving force is the anticipated policy mix in the US," said Brown Brothers Harriman analysts in a note to clients. "While most economists are focusing on either the higher US interest rates and a likelihood of a somewhat more aggressive Fed tightening cycle, or the possibility of a dramatically more stimulative fiscal stance. We see the combination (the policy mix) as an exceptionally potent force that will continue to propel the dollar higher," the analysts wrote.
The US dollar scaled an eleven-month peak on Tuesday and Treasury yields extended their rise as investors braced for higher inflation in the United States amid expectations of fiscally expansionary polices under Donald Trump's presidency. The risks of faster-than-expected Federal Reserve rate increases have dragged on emerging market assets, particularly equities and currencies, which have benefited from large capital inflows. MSCI's broadest index of Asia-Pacific shares outside Japan was flat in early trades while Australian stocks were off 0.5 percent. 
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