Asia markets extend Fed-fuelled rally, Tokyo hit by yen

HONG KONG - Asian markets extended their gains Friday on the lingering effects of the Federal Reserve's lower interest rate outlook, but Tokyo stocks sank as a surging yen crippled Japan's exporters.

The Fed's decision Wednesday to scale back its forecasts on hiking borrowing costs -- citing global turmoil and weak growth -- was greeted with relief across most trading floors on Thursday, with shares rallying from Asia to the Americas.

It also provided a boost for emerging market currencies and sent the dollar tumbling, which in turn provided a boost to dollar-priced crude oil, with both main contracts surging above $40.

And the positive trend continued Friday, with most equities markets and emerging currencies pushing on with more gains.

"Markets are still settling down after the more-dovish- than-expected Fed," Philip Borkin, a senior economist in Auckland at ANZ Bank New Zealand Ltd., said in a note to clients.

"It appears (Fed policymakers) have become more concerned with the outlook for the global economy," he said, according to Bloomberg News.

In early exchanges Hong Kong was up 0.6 per cent, Shanghai added 1.4 per cent and Sydney gained 0.2 per cent. Seoul, Singapore, Taipei and Manila also enjoyed healthy advances.

However Tokyo slumped 1.3 per cent by the break and the yen pushed towards levels not seen since late 2014 as the prospect of low US returns and dim global growth prospects makes the safe-haven Japanese unit more attractive.

The dollar bought 111.26 yen in Tokyo, well off the 113.71 yen in before the Fed's announcement Wednesday. At one point Thursday in New York it plunged as low as 110.71 yen.

The strength of the yen has rattled Japanese central bankers who just last month announced a shock decision to take interest rates into negative territory as they struggle to kickstart inflation and economic growth.

"There's concern for exporters' earnings," Nobuyuki Fujimoto, a senior market analyst at SBI Securities Co. in Tokyo, said.

"If the yen's trading around 114 to the dollar than companies will expect profits next fiscal year, but when it's 110, most exporters will post losses."

The greenback also retreated further against higher-yielding units, with the South Korean won up one per cent, Australia's dollar 0.4 per cent higher and the Malaysian ringgit 0.1 per cent higher. The Taiwan, New Zealand and Singapore dollars were also up.

On oil markets the main US benchmark West Texas Intermediate held on to gains above $40, which it broke above Thursday for the first time this year as the weaker dollar made it cheaper for holders of other currencies.

WTI was up 0.2 per cent and Brent added 0.1 per cent.

Crude has seen huge buying interest since Wednesday as the world's key producers led by Russia and Saudi Arabia agreed to hold talks next month to address a supply glut that has depressed prices for almost two years.