Asian markets climbed and the dollar weakened on Thursday in response to a surprise decision by the US Federal Reserve to keep its massive stimulus programme intact.
The announcement to hold off winding down its $85 billion a month bond-buying fuelled a buying spree on Wall Street, sending the Dow and S&P 500 to record highs.
Asian investors took up the baton Thursday. Tokyo rose 0.99 percent, Hong Kong jumped 1.87 percent and Sydney added 1.02 percent to a five-and-a-half-year high.
Emerging markets were the biggest gainers after suffering a heavy sell-off in August on expectations the Fed’s easy money policy — which helped fuel an investment splurge this year — would come to an end.
Manila surged 3.40 percent, Singapore added 1.86 percent and Kuala Lumpur added 1.16 percent
Seoul, Shanghai and Taipei were closed for public holidays.
In an eagerly awaited announcement, the Fed said it would keep the stimulus in place as it wanted to further gauge the economic impact of public spending cuts and a spike in interest rates in the past four months.
Instead it cut its growth forecast for this year and next as chairman Ben Bernanke warned of possibly “very serious consequences” from a brewing political battle in Washington over a new budget and the US debt ceiling.
“The Federal Reserve’s policy is to do whatever we can to keep the economy on course. And so if these actions led the economy to slow, then we would have to take that into account, surely,” he told reporters.
He said the bank could still start reducing the bond-buying — which aims to hold down long-term interest rates — in the next three months, but only if the economic outlook improves.
“There is no fixed calendar,” he said.
Wall Street welcomed the announcement. The Dow rose 0.95 percent, the S&P 500 climbed 1.22 percent and the Nasdaq was up 1.01 percent.
Most economists had expected the Fed to begin tapering its spending — with forecasts of a reduction of $5 billion-$15 billion — after weeks of upbeat data suggested the US economy was at last gaining strength.
But Matthew Sherwood, head of investment market research at Perpetual in Sydney, told Dow Jones Newswires: “It is a pretty patchy recovery, and it is a sign that the US is not ready for a reduced stimulus.”
With the prospect of vast sums of cash continuing to be pumped into financial markets, the US dollar sank in New York to 98.13 yen from 99.20 yen on Tokyo earlier in the day, while the euro jumped to $1.3511 from $1.3353.
On Thursday the US unit faced fresh selling pressure, slipping to 98.10 yen, while the euro bought $1.3525. The European single currency also fetched 132.69 against 132.55 yen.
On oil markets, New York’s main contract, West Texas Intermediate for delivery in October, gained 67 cents to $108.74, while Brent North Sea crude for November was up 44 cents to $111.04.
Gold was $1,364.29 an ounce at 0200 GMT compared with $1,300.40 late Wednesday.
Source: AFP
