A stronger dollar and rising yields: How the Fed’s rate hike could hit global markets

Asian shares were mixed on Thursday following the Federal Reserve's decision to raise interest rates for the first time in three years. Wall Street closed lower, causing stocks to fluctuate across Asia. The Fed's interest rate hike decision brings the key rate to a target range of 3.75%-4.00%, as it aims to control U.S. inflation that remains stubbornly above its target.

Japan's Nikkei 225 index rose by 0.2% to 64,067.53. South Korea's Kospi increased by 0.9% to 6,778.49. The Hong Kong Hang Seng declined by 0.7% to 24,533.46, while Shanghai Composite index fell by 0.4% to 3,877.46. Australia's S&P/ASX 200 rose by 0.3% to 8,718.20. Taiwan's Taiex increased by 1.3%, and India's Sensex went up by 0.3%.

The S&P 500 on Wall Street dropped by 0.5% on Wednesday, while the Dow Jones Industrial Average fell by 1.2%. The technology-heavy Nasdaq composite was mostly unchanged. Market reactions were as expected, according to Lorraine Tan, director of equity research for Asia at Morningstar, but the ongoing Iran war may keep pressure on inflation.

The two-year U.S. Treasury yield jumped to 4.72% following the Fed's announcement, compared to around 4.67% late Tuesday. The 10-year Treasury yield remained around 5.00%. Higher government bond yields since the war, driven by energy shock and concerns about U.S. national debt, have contributed to the upward trend. The U.S. dollar fell early Thursday to 156.04 Japanese yen from 156.26 yen, while the euro increased to $1.1467.

Oil prices edged slightly higher, as limited oil flows in the Strait of Hormuz and Saudi Arabia's closure of a key oil pipeline add to oil supply pressure.