Investors worry that higher US interest rates could cause capital to leave Asia’s emerging markets and spur currency depreciation in the region, causing financial turbulence.
Tech stocks fell sharply. An index in Hong Kong, which tracks the largest Chinese technology companies, fell more than 4%. Alibaba fell more than 6%.
“I would say that the committee is prepared to raise the federal funds rate at the March meeting, provided the conditions are right to do so.” he told reporters on Wednesday.
In a statement, the Fed said it would “soon be appropriate to raise the target range for the federal funds rate,” with inflation well above 2% and a strong labor market.
Expectations of higher US interest rates pushed a key dollar index to its highest level in almost a month. The US Dollar Currency Index – which measures the strength of the dollar against a basket of currencies used by US trading partners – has risen 0.7% to trade at 96.65.
Outside of external growth shocks, “there is little that would prevent the Fed from raising interest rates at its March meeting,” Kerry Craig, global market strategist for JP Morgan Asset Management, wrote in a note Thursday. He added that a tightening of Fed policy would probably “increase market volatility during the year. “
The International Monetary Fund recently warned that emerging markets and developing economies should prepare for possible turbulence in financial markets as US and Europe raise policy rates.