Asia: Markets rally with Wall St as Yellen sparks buying spree

[HONG KONG] Asian markets surged on Thursday, extending a global rally that saw another record on Wall Street after the head of the Federal Reserve indicated it would take a gradual approach to raising US interest rates.

In closely watched testimony to Congress, Janet Yellen said the central bank would keep lifting borrowing costs as long as the world's top economy showed improvement, taking into account inflation remained below its two percent target.

The remarks lit a fire under equities, with the Dow posting its highest close, on the prospect that money would continue to be cheap for the time being.

Stephen Innes, senior trader at Oanda, said she "unambiguously drew attention to inflation as the critical determinant of Fed rate hikes. Given the market's tepid inflation expectations, traders quickly repriced an even more cautious rate hike cycle as December odds fell to 50 per cent from around 70 per cent".

Tokyo's Nikkei ended the morning 0.2 per cent higher, while Hong Kong jumped one percent to its highest level since mid-2015 and Sydney climbed 0.9 per cent. Singapore gained 0.4 per cent and Seoul was more than one per cent higher, with Wellington, Taipei and Manila all well up.

Shanghai was 0.2 per cent stronger ahead of the release of Chinese trade data later in the day.

'YELLEN BLINKED'

However, while equities were on the rise the dollar came under pressure as expectations for further monetary tightening from Washington this year eased.

There had been talk of late that the Fed would announce up to two more increases in rates before year's end.

"Markets seem to have concluded that ... Yellen just blinked, now less confident that inflation is on track towards the Fed's two percent target, with obvious implications for what that might mean for Fed policy," Ray Attrill, head of FX strategy at National Australia Bank, said in a commentary.

Adding to downward pressure on the greenback is the ongoing crisis surrounding Donald Trump after his son released emails showing he had embraced Russia's efforts to support the tycoon's presidential campaign against Hillary Clinton.

The White House has been battered by accusations over Russian collusion and accusations of cover-ups - fuelling worries about the president's ability to push through his market-friendly economic agenda.

The US unit held its losses against the yen and euro, while it is also sharply lower versus the Canadian dollar after that country's central bank lifted interest rates and signalled more on the horizon.

AFP