Asia Stocks Slide; Kiwi Dollar Tumbles as RBNZ Signals Hikes Over
TOKYO, May 24 (Reuters) - Asian stocks on Wednesday extended a global sell-off as U.S. debt ceiling negotiations dragged on without resolution, while the New Zealand dollar tumbled after the central bank caught markets off-guard by flagging that its tightening cycle is over.
The U.S. dollar - paradoxically - remained elevated amid safe-haven demand, which was also a driver of Treasuries and pushed yields lower.
Crude oil prices kept rising, though, after a warning from the Saudi energy minister to speculators that raised the prospect of further OPEC+ output cuts.
The New Zealand dollar was one of the major movers in the Asian day. It dropped as much as 1.3% after the Reserve Bank wrong-footed markets by keeping its forecast for the terminal rate at 5.5%, after hiking by a quarter point to that level.
"It's an indication that the tightening cycle is over," said Jason Wong, a strategist at Bank of New Zealand. "No one was really expecting that."
Market pricing had favoured a half-point hike, and traders were also primed for an extension of the tightening streak.
The New Zealand dollar was one of the major movers in the Asian day. It dropped as much as 1.3% after the Reserve Bank wrong-footed markets by keeping its forecast for the terminal rate at 5.5%, after hiking by a quarter point to that level.
"It's an indication that the tightening cycle is over," said Jason Wong, a strategist at Bank of New Zealand. "No one was really expecting that."
Market pricing had favoured a half-point hike, and traders were also primed for an extension of the tightening streak.
Reports that Treasury has asked federal agencies whether they can delay upcoming payments added to the sense of crisis.
"Payment prioritisation is now real," Chris Weston, head of research at brokerage Pepperstone in Melbourne, wrote in a client note.
"And while it seems highly prudent to have this conversation, the market's anxiety levels have heated up consequently," he said. "The market is starting to de-risk."
The U.S. dollar index , which measures the currency against six major peers, eased 0.1% to 103.43, but remained close to a two-month high of 103.63 reached last week.
Long-term Treasury yields ticked down to 3.68% in Tokyo, extending a retreat from a more than two-month high of 3.696% reached in New York.
In commodities, gold edged 0.1% higher to around $1,977 as traders eyed debt ceiling talks.
Crude oil price extended gains from Tuesday, when Saudi Energy Minister Prince Abdulaziz bin Salman warned speculators to "watch out," saying "they will be ouching."
Brent crude futures rose 68 cents to $77.52 a barrel, while U.S. West Texas Intermediate crude (WTI) gained 75 cents to $73.66 a barrel.
Reporting by Kevin Buckland