By Dominic Lau
TOKYO (Reuters) – Asian shares hit a near four-week high on Thursday and the dollar extended losses on comments by Federal Reserve Chairman Ben Bernanke that monetary stimulus would still be needed for the foreseeable future.
European shares were expected to shoot higher, with London’s FTSE 100 seen opening up as much as 1.6 percent and Germany’s DAX up as much as 1.3 percent. The S&P 500 index futures rose 1.1 percent.
Financial markets have recently sold off on concerns that the Fed may begin to scale back its $85 billion a month bond-buying programme as soon as September.
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But Bernanke’s remarks, which played down the strength of last week’s June payrolls report, prompted investors to reassess the risk of an early end to the Fed’s programme. They cut long dollar positions and sent U.S. Treasuries higher.
The dollar index dipped 0.2 percent, extending Wednesday’s 1.8 percent fall – a magnitude not seen since 2008-2009 at the height of the global financial crisis.
“I was pretty shocked with this selloff this morning. Obviously, Bernanke kicked it all off, but it was a bit of a delayed reaction,” said Bart Wakabayashi, head of forex at State Street Global Markets in Tokyo.
“I’m hearing there were some margin calls, stop losses triggered there, and it moved down, so it seems like it’s pretty thin and maybe some Asian players were trying to unwind their dollar longs.
“But it does seem like a bit of an overreaction. Having said that, it’s a bit surprising, all of a sudden, the change in the tone of Bernanke, so it’s a whole new world all of a sudden.”
The euro surged 1.8 percent after earlier hitting a three-week high of $1.32085. Against the yen, the dollar eased 1 percent after falling to a two-week low of 98.20 yen.
Citi said the dollar selloff offered an opportunity to buy on dip given the strength in the U.S. economy in the near term.
Commodity currencies also jumped against their U.S. peer with the Australian dollar climbing as high as $0.9306, putting further distance from a 34-month trough of $0.9036 plumbed just last week.
The Australian dollar was also aided by a surprise increase in Australian employment in June, a result that may lessen the chance of the central bank lowering interest rates further in the short-term.
RELIEF RALLY
“Those who had expected that the Fed’s tapering could start as early as September were relieved that it would come later than that,” said Kyoya Okazawa, head of global equities at BNP Paribas in Tokyo.
MSCI Asia-Pacific ex-Japan index jumped 3 percent, hitting a near four-week high and on track for its biggest one-day rise in 10 months, while Seoul and Thai stocks rose 2.9 and 3.2 percent, respectively.
China’s CSI300 index surged 4.6 percent, buoyed by a report in official media that financing rules may be partially relaxed for real estate firms.
But as the yen strengthened, Tokyo’s Nikkei share average underperformed other Asian markets, up 0.4 percent.
The Bank of Japan kept its monetary policy steady but said an economic recovery was underway, its most optimistic view in 2-1/2 years reflecting the positive impact of a weakening yen and its massive stimulus.
Underscoring the improving sentiment, Japan’s core machinery orders rose 10.5 percent in May from the previous month.
The Bank of Korea also on Thursday raised economic growth forecast this and next year as it held the benchmark interest rates steady.
COMMODITIES HIGHER
Copper prices gained 3.2 percent to exceed $7,000 a tonne, hitting a three-week high and extending the previous session’s 1.4 percent rise as the dollar softened.
Gold climbed 2.4 percent to a three-week high and was on track for a fourth straight day of gain.
U.S. crude oil prices added 0.7 percent to their highest level since March 2012 and after Wednesday’s 2.9 percent jump, their biggest one-day rise in more than two months as U.S. data showed the biggest two-week decline on record in oil stockpiles.
Yields on benchmark 10-year U.S. Treasuries eased 11 basis points to 2.5606 percent in Asian trade, sharply off a 23-month peak of 2.755 percent touched on Monday after Friday’s stronger-than-expected payrolls data.
(Additional by Lisa Twaronite and Ayai Tomisawa in Tokyo, Ian Chua in Sydney, Masayuki Kitano in Singapore and Clement Tan in Hong Kong; Editing by Eric Meijer and Sanjeev Miglani)
Source: Reuters
