Fed Optimism Lift Asia Stocks, Dollar Struggles

Tokyo shares led Asia higher on Thursday, riding on Wall Street's optimism after the U.S. Federal Reserve gave a positive assessment of the economy and committed to retaining accommodative monetary policy.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gained 0.6 percent.

Tokyo's Nikkei .N225 brushed aside a stronger yen and outperformed the rest of the region, advancing 1.5 percent after hitting a 4-1/2-month high.

"Yesterday's Fed announcements include more than one piece of good news, so that's positive for Japanese market sentiment," said Nobuhiko Kuramochi, a strategist at Mizuho Securities in Tokyo.

"The Fed sees the U.S. economy is on track, while it hinted of low interest rates in the long term."

On Wall Street, the S&P 500 .SPX ended at a record high on Wednesday after the Fed hinted at a slightly faster pace of interest-rate increases starting next year but suggested rates in the long run would be lower than it had indicated previously.

World markets have been buffeted in recent months by a slowdown in China and an uneven global recovery. Turmoil in Ukraine and Iraq have further undermined sentiment.

The Fed's accommodative policy stance is seen as one of the positives, as rising consumption in the U.S. is expected to help underpin some of Asia's big export-driven economies.

The dollar struggled against its peers, hurt as U.S. Treasury yields fell sharply on the Fed's long-term rates projection and as policymakers showed little discomfort over recent signs of a pick up in consumer prices.

"Hawkish comments by top BOE officials - not just Governor Carney - are encouraging investors to bring forward the beginning of a normalization of monetary policy and a tightening cycle, no matter how gradual. In contrast, the Federal Reserve stuck to its course, despite the recent pick-up in inflation and the improvement in the labor market," wrote Marc Chandler, global head of currency strategy at Brown Brothers Harriman, in a note to clients.

The dollar index .DXY, a gauge of the greenback's strength against a basket of keycurrencies, was down 0.2 percent.

The dollar traded little changed at 101.94 yen JPY= after shedding 0.2 percent on Wednesday.

Sterling was steady at $1.6993 GBP=D4. The pound rose past $1.70 for the first time since mid-2009 early this week after BoE chief Marc Carney warned markets may be mistaken if they think rates will not rise in 2014. It has since lost some steam after BoE minutes left unclear the timing of the next rate hike.

The euro dipped 0.1 percent to $1.3585 EUR=, taking a breather following the previous session's 0.35 percent rise.

In commodities, Brent crude LCOc1 hovered near Wednesday's nine-month closing high of $114.26 a barrel hit on persistent worries over oil exports from war-torn Iraq. O/R

Three-month copper on the London Metal Exchange CMCU3 fell 0.4 percent to $6,684.75 a tonne, pulling back from a two-week peak of $6,744 hit Wednesday on optimism over the U.S. economy and prospects that China stands ready to support 7.5 percent growth. MET/L

Platinum XPT= and palladium XPD= extended their winning streak, with both trading near one-week highs as a miners' strike in major producer South Africa looked set to continue.

 

Analysts saw the miners' strike curtailing the rand's strength ZAR=D3, which surged 1 percent against the dollar on Wednesday on news the country's current account deficit narrowed to levels last seen in 2012.

(Reuters)

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