Asia: Stocks advance as dovish Fed gives boost to risk assets, US dollar under pressure

[SYDNEY] Asian stocks rose on Thursday (March 17) after the Federal Reserve pared back expectations for interest-rate increases this year.

The MSCI Asia Pacific Index gained 1.1 per cent to 127.54 as of 9 am in Tokyo. Japan's Topix index added 0.6 per cent even after the yen gained 0.6 per cent against the US dollar on Wednesday. South Korea's Kospi index rose 0.5 pe r cent. Australia's S&P/ASX 200 Index gained 0.6 per cent.

The Fed's signal that borrowing costs won't rise as fast as officials previously forecast propelled US stocks to their highest level this year. Japanese shares climbed even after guidance from the US central bank helped strengthen the yen.

"The Federal Reserve has once again come to the market's rescue," said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

"The Fed offered to meet the market in the middle, with its dot plot of expectations adjusted to reflect only two rate rises this year, down from four previously."

Fed officials kept the target range for the benchmark federal funds rate unchanged at 0.25 per cent to 0.5 per cent, citing the potential impact from weaker global growth and financial-market turmoil on the US economy.

The median of policy makers' updated quarterly projections saw the rate at 0.875 per cent at the end of 2016, implying two quarter-point increases this year, down from four forecast in December.

The MSCI Asia Pacific gauge is up 13 per cent from this year's low last month after commodity producers and financial shares rallied. The Bank of Japan refrained from expanding monetary policy this month, while the European Central Bank boosted an already unprecedented stimulus package.

Energy shares advanced after US oil climbed 5.8 per cent on Wednesday as some Opec members agreed to meet with other producers in April for talks on capping production while US crude stockpiles increased less than anticipated.

Futures on Hong Kong's Hang Seng Index and contracts on the Hang Seng China Enterprises Index of mainland firms listed in the city advanced 0.2 per cent in most recent trading. The Shanghai Composite climbed a fourth day on Wednesday after Premier Li Keqiang said at the close of annual policy meetings that the government will employ "innovative measures" to keep economic growth on track.

Futures on the Standard & Poor's 500 Index advanced 0.1 per cent. The S&P 500 rose 0.6 per cent on Wednesday, closing at its highest level since Dec 31 as mining and energy shares rallied. The benchmark measure has climbed 11 per cent from a February low.

BLOOMBERG