Asian shares hit 3-week high on Bernanke's comments

 

Asian shares climbed to a three-week high on Thursday on comments by Federal Reserve Chairman Ben Bernanke that highly accommodative monetary policy would be needed for the foreseeable future, and the dollar stabilised.

 

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.

 

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 US Treasuries prices higher.

 

"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 dollar index added 0.3% after dropping 1.8% on Wednesday - a magnitude not seen since 2008-2009 at the height of the global financial crisis.

 

The euro surged 1.4% after earlier hitting a three-week high of $1.32085. Against the yen, the dollar eased 0.3% after falling to a two-week low of 98.20 yen.

 

Commodity currencies also jumped against its US peer with the Australian dollar climbing as high as $0.9300, 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.

 

Asian shares, as measured by MSCI Asia-Pacific ex-Japan index , jumped 1.7% to a three-week high, while Seoul shares surged 2% and Hong Kong's Hang Seng Index rose 1.6%.

 

But as the yen strengthened, Tokyo's Nikkei share average  underperformed other Asian markets and was flat, ahead of the outcome of a Bank of Japan's policy meeting later on Thursday.

 

The BOJ is set to stand pat though it will upgrade its view of the economy on expectations that a weak yen and its massive monetary stimulus will be enough to offset the hit from slowing Chinese growth.

 

Underscoring the improving business sentiment, Japan's core machinery orders rose 10.5% in May from the previous month.

 

US crude oil prices slipped 0.4% after earlier trading as high as $106.95 a barrel, their highest level since March 2012, and after Wednesday's 2.9% jump, their biggest one-day rise in more than two months as US data showed the biggest two-week decline on record in oil stockpiles.

 

Gold climbed 1.5% to a two-week high and was on track for a fourth straight day of gain.

 

Copper prices gained 1.8% to exceed $6,900 a tonne, extending the previous session's 1% rise as the dollar softened.

 

Yields on benchmark 10-year US Treasuries eased 8.3 basis points to 2.5907% in Asian trade, sharply off a 23-month peak of 2.755% touched on Friday after the stronger-than-expected payrolls data.

 

Tracking the performance of US Treasuries, 10-year Japanese government bond yield slipped 1 basis point to 0.840%.