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[HONG KONG] Asian stocks piled on fresh gains on Thursday, following another global rally as investors keep a nervous eye on the Federal Reserve's interest rate decision later in the day.
While traders are split on whether the US central bank will hike borrowing costs, a broad sense of optimism helped emerging market currencies tick higher while oil extended Wednesday's surge on hopes for a pick-up in demand.
However, Shanghai remains volatile - continuing its wild swings - as authorities struggle to calm nerves about a sharp slowdown in the world's number two economy.
The end of the Fed's rate decision has been the key focus for global investors for weeks as bank policymakers have to weigh a healthy US recovery with a slowdown in overseas economies as well as the recent turmoil unleashed by fears over China.
"It's hard to recall an event given so much attention from market players, the implications are far reaching and history provides absolutely no guide," Chris Weston, chief markets strategist in Melbourne at IG Ltd, said in an e-mail to clients.
"Price action in European and US equity markets suggests no one wants to be left behind if the Federal Reserve announces something risk friendly," Bloomberg News reported him as saying.
In New York the Dow, S&P 500 and Nasdaq all tacked on healthy gains, while London and Paris were more than one percent higher.
On Thursday Tokyo and Sydney rallied more than one percent, while Hong Kong was 0.70 per cent higher. Seoul, Singapore, Taipei and Wellington also saw keen buying.
Shanghai dipped 0.78 per cent - it surged almost five percent Wednesday after losing around six percent in the previous two sessions.
While the Fed is expected to lift rates by year end, global markets have moved broadly higher in the past few sessions, with economists predicting the Fed will stand back from moving this month, taking into account the recent strife in equities.
There are fears a rise now could severely hurt the struggling world economy, and especially damage emerging markets as investors withdraw cash and turn to the United States for better and safer returns.
With an increase considered less likely the dollar eased.
It stood at 120.39 yen, against 120.61 yen Wednesday in New York, while the euro was at US$1.1306 compared with US$1.1285.
It also retreated against higher-yielding, or riskier, currencies. The Indonesian rupiah rose 0.10 per cent, the Taiwan dollar gained 0.20 per cent, the Thai baht edged up 0.05 per cent and the South Korean won was 0.50 per cent higher.
In Japan the Nikkei advanced despite Standard & Poor's decision Wednesday to downgrade its sovereign credit rating on the country, saying the government had little chance of turning round the economy or weak inflation in the coming years.
The move came a day after the central bank held back from expanding its stimulus saying the economy was growing moderately. The vast annual asset-buying scheme was a key pillar of a policy blitz launched by Prime Minister Shinzo Abe to kickstart Japan's moribund economy and conquer deflation.
On Thursday, data showed Japan's trade deficit narrowed by 40 per cent in August from a year earlier owing to a slump in the cost of oil imports although exports were weak as appetite in China wanes.
Oil prices enjoyed a second bump after Wednesday's surge that came in response to a report showing a plunge in US stockpiles, fuelling hopes demand may be picking up.
US benchmark West Texas Intermediate climbed 0.30 per cent on Thursday and Brent was up 0.18 per cent. On Wednesday WTI surged almost six percent and Brent jumped more than four per cent.