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Asia: Most markets boosted by Fed but US dollar sinks

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[HONG KONG] Asian markets rallied and the dollar sank on Thursday after the Federal Reserve lifted US interest rates but gave a more dovish outlook for future hikes, while the euro was also boosted by the expected victory of the incumbent party in Dutch elections.

After a much-anticipated meeting the US central bank lifted borrowing costs by a quarter of a point but suggested only another two rises this year, confounding talk of a possible three or four.

Fed boss Janet Yellen also said that while President Donald Trump's planned big-spending, tax-cutting plans could fuel growth and inflation, she would keep a wait-and-see attitude before making any decisions on how to shape monetary policy.

The news, which came with an upbeat assessment of the world's top economy, fired US stocks and sent the greenback tumbling in US trade.

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And that continued into Asian business, with Hong Kong up 1.2 per cent, Shanghai adding 0.7 per cent and Seoul advancing 0.6 per cent. Sydney ticked up 0.2 per cent and Singapore was 0.8 per cent higher, while there were also healthy gains in Wellington, Taipei, Jakarta and Manila.

"Whether folks agree or disagree with the need to hike, the key here is that the Fed has signalled to markets, and importantly US and global businesses, that it is in control and the economy is moving as expected," said Greg McKenna, chief market strategist at AxiTrader, in a note.

"Janet Yellen stressed in her press conference that the Fed's decision today was a reflection of where the economy is now with reference to the Fed's mandate. She highlighted that the (policy board) was not making a judgement on what impact the Trumponomics stimulus might have on the economy."


But Tokyo ended the morning 0.1 per cent lower as the dollar retreated against the yen, hurting Japanese exporters.

The US unit bought 113.32 yen Thursday, down from Wednesday in New York and well off the levels above 115 yen touched earlier this week.

The greenback was also sharply down elsewhere, with the Australian dollar surging more than one percent, South Korea's won 0.9 per cent higher and the Mexican peso soaring two per cent. The New Zealand, Canadian and Taiwanese dollars also posted strong gains of about one percent.

Stephen Innes, senior trader at OANDA, said: "The absence of any observable hawkish guidance from the Fed will leave the greenback under pressure near term."

The euro sat comfortably above US$1.07, more than one cent up from earlier Wednesday, as exit polls showed Dutch Prime Minister Mark Rutte easily defeating far-right, anti-EU rival Geert Wilders in a vote considered a bellwether of populist support in Europe.