The U.S. Federal Reserve’s decision not to raise its key interest rate drew a collective shrug on Friday from investors in Asia.
Japan’s Nikkei shed 2%, while benchmark indexes in Sydney, Hong Kong, Seoul and Shanghai posted mild gains.
The U.S. dollar, meanwhile, lost ground against currencies in Asia. Gold prices were up around 1% at $1,130 an ounce.
The Fed’s key rate has been stuck near zero since the depths of the financial crisis, and it’s been nearly a decade since the central bank raised rates.
Rates will go up — the question is when? The U.S. economy is relatively strong compared to its peers, but a global economic slowdown, low inflation in the U.S. and volatile stock markets encouraged the Fed to once again punt on raising rates.
“The situation abroad bears close watching,” Fed chair Janet Yellen said at a press conference Thursday. “Heightened concerns about growth in China and other emerging market economies have led to notable volatility in financial markets.”
Investors in emerging markets are paying particularly close attention to the Fed.
In 2013, when former Fed Chair Ben Bernanke signaled that the bank would eventually end its stimulus program, emerging markets had a “taper tantrum.”
The dollar’s surge, like rising interest rates, makes it harder for emerging nations and businesses to pay off their debt. And emerging economies’ engine of growth — commodities like oil, copper and soy — have fallen off a cliff in the past year.
The major concern is that all these factors could cause cash to flood out of emerging markets and companies.