US Fed chief teases 2015 rate hike

At the close of trading in Asia, Japan's Nikkei 225 was up 1.8 percent at 17,880.51, South Korea's Kospi had fallen 0.2 percent to 1,942.85, Hong Kong's Hang Seng had inched up 0.4 percent to 21,186.32, and China's Shanghai Composite had dropped 1.2 percent to 3,103.90.

Meanwhile, the Stoxx Europe 600 Index had added 3.2 percent at 11:30 a.m. in Berlin. The euro dropped to under 1.12 against the US dollar, as the greenback climbed against most emerging currencies.

Change after all?

The reactions came after Fed chair Janet Yellen on Thursday revived rate talk during a speech at the University of Massachusetts at Amherst. The central bank chief said she expected to begin tightening policy later this year, as long as inflation remains stable and the US economy continues its upward trajectory.

"Most FOMC [Federal Open Market Committee] participants, including myself, currently anticipate that achieving these conditions will likely entail an initial increase in the federal funds rate later this year, followed by a gradual pace of tightening thereafter," Yellen told hundreds of students and local residents at Amherst. The FOMC is the body that set the course of the Fed's monetary policy.

As it stands, she added, US economic prospects "generally appear solid."

Surprise statement

The chairwoman's statement was met with some confusion. Just last week, the Fed had decided to hold off on raising rates, in light of a string of weak economic data coming out of the world's second-largest economy, China.

But Thursday's comments could signal an imminent change in course. It would mark the first time Washington has tightened its rate policy in nearly a decade. The Fed has been reluctant to shake the boat in the wake of the financial crisis, fearing it could scare off investors and stun recent years' positive growth of the US economy.

'No guarantee'

Still, some analysts took Yellen's statement with a healthy grain of salt.

"Despite what Yellen said, there is still no guarantee that the Fed will hike rates this year. As such, the dollar is likely to lack clear direction," said Masafumi Yamamoto, senior strategist at Monex in Tokyo, who expects the pair to stick to a 118-122 yen range for a while.

After all, this is far from the first time Yellen has teased a rate hike. For the better part of the year, markets have parsed her every word. Many had even anticipated a policy change this summer.

pad/uhe (AP, dpa, Reuters)