A gauge of Asian equities was little changed, with stocks in Japan posting declines while those in Hong Kong rose. The regional index is poised to record a quarterly loss of around 4% — the largest for the period since September 2022 — due to a stronger dollar and speculation that global interest rates will remain higher for longer.

Contracts for the S&P 500 and Nasdaq 100 edged lower after the US indexes gained on strong performances by tech behemoths including Nvidia Corp. and Meta Platforms Inc.

Markets in mainland China are closed as the country starts its Golden Week holiday, which may damp trading in the region through the first week of October.

September is also still shaping up to be the worst month in 2023 for US stock benchmarks and the weakest month for global bonds since February after the Federal Reserve left interest rates at the highest in 22 years at its last meeting. 

A gauge of the dollar was little changed in Asian trading hours, but remained on course for a second quarterly gain.

“The dollar unfortunately is a huge driver, a headwind or tailwind to emerging market equities,” Derrick Irwin, emerging markets portfolio manager at Allspring Global Investments, said on Bloomberg Television. 

Allspring expects the dollar to remain supported as long as the Fed retains a hawkish bias. “But it probably creates an opportunity to begin accumulating emerging market shares for when we do see the rate cycle continue to decline, maybe sometime in 2024,” Irwin said.

The yen was little changed against the greenback after data showed inflation in Tokyo slowed for a third straight month in September, while Japan’s August industrial output was unchanged from the previous month. The country’s 30-year bond yield rose to the highest since 2013 amid upward pressure on global yields.

Treasury yields inched higher after slipping from 16-year highs on weak consumer spending data and dovish Fed comments. The yield on 30-year Treasuries is on track for the largest quarterly jump since 2009.

Meanwhile, oil tempered this week’s rally as investors cashed out. The commodity has gained for a fourth month, and is set for its best quarter since March 2022, following production cuts by OPEC+ linchpins Saudi Arabia and Russia.

Easing hope

In the US, dovish-leaning comments from one legislator and weak consumer spending data helped stoke hope for some easing of the Fed’s messaging. Even if the US enters a recession it should be able to skirt a more severe downturn, according to Richmond Fed president Tom Barkin. Chair Jerome Powell sidestepped investor concerns over the outlook for interest rates at an event. 

It’s still too early to know if another rate increase will be needed, Barkin told Bloomberg Television. Earlier, the Chicago Fed’s Austan Goolsbee said legislators were at risk of overshooting on interest rates by putting too much emphasis on the idea that steep job losses are needed to quell inflation.

Read more: Powell Says Public’s Understanding Key to Fed Impact on Economy

Personal consumption, the main driver of the US economy, rose an annualised 0.8% in the April-to-June period, the weakest advance in over a year. Other data showed GDP rose at an unrevised 2.1% rate during the period while weekly jobless claims came in lighter than estimates. Traders will next be looking at Friday data on the Fed’s preferred measure of inflation — the personal consumption expenditures price index.