A divided Federal Reserve voted 9-3 to hold rates at 3.5-3.75%, leaving policy unclear, pushing 30-year Treasury yields to their highest since 2007 and briefly lifting Bitcoin and gold as traders priced rate ambiguity ahead of the September meeting. Regional stress is amplifying market risk: South Korea’s KOSPI plunged nearly 6% on Wednesday and sits about 40% below its June peak, prompting regulators to cap retail allocation in single-stock leveraged ETFs at 20%, a move that could damp retail-driven crypto and DeFi activity while Brent crude remains below $90 after Iran-related strikes.

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In Brief

Japan's Nikkei rose while South Korea's KOSPI fell as Asian markets traded mixed.
The Fed held rates steady in a 9-3 vote, its most divided decision under Warsh.
Brent crude held below $90 a barrel after a Wednesday spike on renewed Iran strikes.

Asian markets traded without clear direction on Thursday. Investors weighed a divided Federal Reserve decision against fresh volatility in South Korean equities.

Japan’s Nikkei 225 climbed nearly one percent, trading above 62,000. South Korea’s KOSPI slipped about one percent, extending a stretch that has erased a large share of the index’s value since its June peak.

A Divided Fed Leaves Rates Unclear

The Fed voted 9 to 3 on Wednesday to hold its benchmark rate at 3.5% to 3.75%. Three regional presidents, Cleveland’s Beth Hammack, Minneapolis’s Neel Kashkari and Dallas’s Lorie Logan, dissented in favor of a hike.

The split marked the most contested vote of Chair Kevin Warsh’s short tenure. Warsh again declined to signal the central bank’s next move, and that ambiguity pushed 30-year Treasury yields to their highest level since 2007.

Traders responded by sending the Dow to its worst session in over a year. Bitcoin and gold, meanwhile, climbed on the split vote.

Korea’s Selloff Deepens as Chipmakers Wobble

South Korea remains the epicenter of the regional selloff. The KOSPI plunged nearly six percent on Wednesday, triggering a circuit breaker for a second straight session and prompting an emergency market meeting.

Regulators have since moved to cap retail allocation in single-stock leveraged exchange-traded funds (ETFs, funds that trade like stocks) at 20%. The cap aims to curb the kind of amplified losses that have driven the index down roughly 40% from its June high.

The KOSPI has been on a sharp decline in the past month as AI exhaustion kicks in. Image Source: Trading View

The volatility has hit chipmakers hardest. SK Hynix fell as much as six percent in Thursday trading, extending a steep two-day slide. Samsung Electronics, however, offered a rare bright spot.

The company posted a record quarterly profit surge of more than 1,800% year over year on booming AI memory chip demand. Investors have largely shrugged off the news amid broader fears over AI-related valuations.

Oil added another layer of uncertainty. Brent crude held below $90 a barrel on Thursday. It had jumped more than four percent a day earlier, snapping a three-day slide. Renewed Iranian strikes on U.S. forces and drone attacks on Saudi facilities drove that rally, just days after diplomatic progress over the Strait of Hormuz had pushed prices lower.

Gina Kim, a portfolio manager at Nordea Asset Management, told CNA that retail margin balances in Korea and Taiwan would be the key signal to watch for when the panic subsides.

The Fed offers no clear signal ahead of its September meeting. Korean regulators are still working to contain retail leverage. The coming days may depend less on new data than on whether investor sentiment settles on its own.

Read the article at BeInCrypto