(Bloomberg) -- The Federal Reserve’s decision to raise interest rates once again but but keep its year-end forecast unchanged is set to keep Asian stocks under pressure but help government bonds rally, according to regional-focused investors and strategists.

A weaker dollar will help bolster emerging-market currencies and may also provide some relief for Asian equity markets, which will otherwise mirror weaker risk appetite seen in the US, the analysts said in comments to Bloomberg.

Asian assets may also move on comments from Treasury Secretary Janet Yellen who said regulators aren’t looking to provide “blanket” deposit insurance to stabilize the US banking system without working with lawmakers.

Here’s what investors and strategists focused on Asia had to say after the Fed:

Chamath De Silva, a senior fund manager for Betashares Holdings in Sydney:

“Asian markets will likely take the lead from the US, so bonds up, stocks down, although the weakness in Asian equities might be tempered by a weaker US dollar,” he said, pointing to the risk-off tone across global markets.

“The big end-of-cycle rallies in bonds have generally followed a pause and the fact that the dots weren’t revised higher and Powell acknowledged that a pause might come in the near term basically gave investors the green light to add duration.”

“This was further supported by the Powell implying that financial conditions might tighten via a credit contraction from the banking channel, further reducing the need for additional rate hikes.”

Kellie Wood, deputy head of fixed income at Schroders Plc in Sydney:

The mood across markets will be risk-off given credit fears. “Look for higher yields to get longer rates. We also added credit protection to position for a greater risk of recession being priced into credit markets.”

“We have been positioned for the end of the policy cycle with a greater risk of recession. We got the acknowledgment from Jerome Powell that tighter credit conditions will do a better job of slowing the economy than rate hikes.”

Redmond Wong, strategist at Saxo Capital Markets HK Ltd.:

“Smaller banks are likely to face a flight of deposits” following Yellen’s “180-degree change in her comments about covering the uninsured deposits.”

“Bank lending will slow further or even contract and bring about a recession. Treasury yields may fall further and Treasuries, in particular the front end of the curve, are a buy. Gold is a buy. Banks stocks may tumble more. Asian stocks, especially financials, will be under pressure.”

“A-shares will do better than Hong Kong as the latter has more exposure to financials. China technology and consumption names, after some initial selloff, may outperform. I would avoid financials and companies with a lot of US dollar debts.”

John Bromhead, a strategist at Australia & New Zealand Banking Group Ltd. in Sydney:

“Now the major risk event is out of the way, risk-tone can improve through the day.” There’s a “little bit of runway here for financial stability concerns to fade and for USD pressure to continue”

“No news is good news when it comes to the regional banking situation in the US. We saw that yesterday. But fundamentally, we are in a higher volatility regime — which is natural at threshold points in hiking cycles. I suppose what’s surprising is how tame the moves in FX have been, relative to rates.”

It’s impossible to predict whether the stresses seen at Silicon Valley Bank and Credit Suisse Group “are the start of a series of dominoes. The policy response seems sufficient to limit that risk — but I find it hard to believe that it’s the end.”

Matthew Haupt, a fund manager at Wilson Asset Management in Sydney:

“The more important meeting of today was Yellen again installing no confidence in a market yearning for it. She is not prepared to make blanket guarantees and lack of strong language is really shaking markets.”

“Expect bonds to be bid, equities to have a weak day again. The risk of policy error is increasing day by day and with no assurances to deposits the stress of the financial system might again come into focus.”

Brendan McKenna, an emerging-markets strategist at Wells Fargo Securities in New York:

“EM Asia should benefit from Powell’s dovish hike today.”

“We saw most of EM rally after the announcement and presser. I think some of the higher betas can do well in the Asia session. Look for the Korean won, Indonesian rupiah and Philippine peso to lead the charge.”

“The banking sector risks are starting to fade, so unless something else gets uncovered that markets haven’t seen yet, I think the worst of the financial sector issues are behind us for now. If that hold true, those capital flows into Indonesia and the rest of Asia can continue and support currencies across the region.”

Carol Kong, a strategist at Commonwealth Bank of Australia in Sydney:

“The Aussie dollar may find further support in the near term if the perceived health of the banking sector continues to improve.”

“We still consider Aussie dollar vulnerable to the downside until the banking issues are fully resolved.” The risks to both dollar-yen and Aussie-yen remain tilted to the downside until the banking concerns are resolved, she said. 

Hebe Chen, analyst at IG Markets Ltd. in Melbourne:

“The imbalance between the unchanged target rate and the renewed inflation projection unveiled the dilemma that the Fed is uncomfortably trapped in. You can also view it as the top policy makers’ confession to the ‘unknown unknowns’.”

“The Asian market will likely go through a direction-searching journey ahead to reprice the more dire outlook. The real risk facing Asian markets is in the unusually wide range of negative possibilities and the Fed’s outlook today just underscored this complexity.”

Chotaro Morita, chief rates strategist at SMBC Nikko Securities Inc. in Tokyo:

“There’s almost no chance for the Bank of Japan to alter its yield-curve-control program when Kazuo Ueda presides his first meeting as governor in April” given the uncertainties facing the Fed in future meetings, he said.

“Depending on the market situation next month, BOJ policy members may even deliberately avoid talking about the yield-curve-control side-effects altogether. If that happens, expectations of a June policy tweak could also disappear. Bets on a YCC tweak may be unwound further in a larger scale.”

--With assistance from Matthew Burgess, Winnie Hsu and Masaki Kondo.

©2023 Bloomberg L.P.