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Asia: Markets mostly welcome Fed rate move

[HONG KONG] The euro and yen maintained their gains against the dollar, while most equity markets outside Japan rallied after comments by the US Federal Reserve cooled expectations of an early summer hike.

While the central bank opened the door for a rise from six years of zero percent rates, it lowered its forecasts for economic growth and inflation and stressed it would remain cautious before making any move.

The news sent US stocks surging, providing a strong platform for regional indexes.

Hong Kong climbed 0.62 per cent, Sydney surged 1.64 per cent and Seoul added 0.24 per cent, while Singapore was up 0.35 per cent.

However, Tokyo sank 0.93 per cent as exporters were hurt by the strengthening yen, while Shanghai retreated 0.72 per cent after rising almost nine percent in a six-session winning streak.

After a two-day policy meeting, the Fed on Wednesday issued a statement that removed a pledge to remain "patient" on raising interest rates, signalling a possible mid-year rate increase.

However bank chair Janet Yellen stressed growth prospects were more muted than three months ago, despite strong increases in jobs creation. She noted consumer spending has slipped, inflation has declined, wages are flat, and the stronger dollar has hurt US exports.

The policy committee lowered its rate outlook to 0.5-0.75 per cent for the end of this year from 1.0 per cent previously, while also reducing its 2016 forecast to 1.75-2.5 per cent from 2.5 per cent.

"Just because we removed the word patient from the statement doesn't mean we're going to be impatient," Ms Yellen told reporters.

The news sent the dollar tumbling and provided much-needed relief for the euro, which has been hammered by the European Central Bank's new stimulus programme.

In early Tokyo trade the dollar was at 120.07 yen against 120.09 yen in New York, and well down from the 121.35 yen level in Tokyo earlier Wednesday.

The euro changed hands at US$1.0844 against US$1.0871 but well up from the US$1.059 earlier Wednesday in Asia.

At one point in New York the dollar had tumbled to 119.57 yen and the euro had hit US$1.101.

"It's difficult to see rate hikes in June, and I expect the timing to keep being pushed back," Mitsushige Akino, an executive officer at Ichiyoshi Asset Management Co in Tokyo, told Bloomberg News.

"Looking at the US's inflation rates, and the fact that wages haven't risen despite the good headline jobs numbers, the US is not in a state to hurry into rate hikes."

Also in New York the Dow climbed 1.27 per cent, the S&P 500 jumped 1.21 per cent and the Nasdaq advanced 0.92 per cent.

Oil prices were lower in Asian trade after jumping in New York in reaction to the Fed news. US benchmark West Texas Intermediate for April delivery eased 61 cents to US$44.05 while Brent crude for May fell 21 cents to US$55.70.

WTI gained US$1.20 in US trade and Brent jumped US$2.40.

Gold fetched US$1,173.30 against US$1,153.82 late Wednesday.


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