Asia extends gains, dollar supported after Fed minutes

Asia extends gains, dollar supported after Fed minutes

Asian stocks rose on Thursday, extending the previous session's gains, while the dollar drew support from minutes of the Federal Reserve's last meeting showing the US central bank was still on course to hike interest rates this year.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 0.5 per cent, touching its highest level since September 2014.

Hong Kong's benchmark Hang Seng Index .HSI was up 1.9 per cent after hitting a fresh seven-year high, fueled by fresh money inflows from mainland China investors who are seeking cheaper valuations after a sizzling Shanghai rally has left some stocks there overstretched. Japan's Nikkei .N225 rose 0.7 per cent, pushing to a fresh 15-year high and closing in on the 20,000 level, above which it hasn't traded since April 2000.

"The mood is helped by the fact that foreign investors are coming back to the Japanese market after they turned sellers early this year," said Hikaru Sato, a senior technical analyst at Daiwa Securities.

Japan finance ministry data showed foreign investors bought a net 1.036 trillion yen of Japanese shares last week, their biggest net buying since early April 2013.

Wall Street posted modest gains overnight after a volatile session following the Fed minutes, which showed officials acknowledged risks from overseas and a weak start to the year at their March meeting. But they remained confident enough in the strength of the economic recovery to continue laying the groundwork for an interest rate hike later this year.

"Federal funds rate futures point towards a rate hike in September or later and this would be positive for the global economy. If the markets had to brace for a June rate hike, that would hit US equities by causing volatility in US debt yields. Global equities, especially those of emerging markets, would be destabilized in turn," said Junichi Ishikawa, market analyst at IG Securities in Tokyo.

The minutes were in line with comments from Fed officials on Wednesday, who said the central bank could still hike US rates this year. At a Thomson Reuters event Wednesday, New York Fed President William Dudley and Fed Governor Jerome Powell described scenarios in which the central bank could move to hike earlier than many expect, and then proceed in a slow and gradual manner on further rate increases.

US Treasury yields ticked higher after the minutes, lifting the appeal of the US dollar. The yield on the benchmark 10-year Treasury note stood at 1.909 per cent in Asian trade, up from its US close of 1.895 per cent on Wednesday.

That helped the dollar add about 0.2 per cent to 120.37 yen, after it fell as low as 119.65 overnight. The euro inched lower to $1.0771 after shedding about 0.3 per cent in the previous session.

The dollar index .DXY, which tracks the greenback against a basket of six major counterparts, rose about 0.2 per cent to 98.174

Crude oil took back some lost ground following a steep plunge overnight triggered by a rise in US stocks and news of record Saudi oil production.

US crude CLc1 was up 1.2 per cent at $51.04 a barrel after shedding nearly 7 per cent on Wednesday, while Brent LCOc1 rose about 1.1 per cent to $56.18.

 

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