Asia shares at 2-month high, yen sags on BOJ

The yen reversed direction and fell against the dollar and euro after the BOJ doubled the amount of low-cost money it was making available to banks to encourage them to write more loans.

European equities were also set to rise, tracking gains in Asia and in the United States. Financial spreadbetters expected Britain’s FTSE 100, Germany’s DAX and France’s CAC-40 to open as much as 0.4% higher.

The MSCI index of Asian shares excluding Japan jumped 1.9% to its highest in two months, tracking US shares which hit a 17-month high.

Wall Street indexes jumped after the US Federal Reserve on Tuesday maintained its pledge to keep interest rates near zero for an extended period and pointed to increased momentum in the recovery of the world’s largest economy. Gains in the US and Asia were also fueled by expectations that Intel Corp would beat current-quarter earnings estimates, thanks in part to robust Asian sales and a rebound in corporate spending on tech products.

Tech stocks in Asia have lagged other sectors so far this year and are seen playing catch-up as global demand recovers.

Shares in South Korea rallied 2.1%, with Hynix Semiconductor up 2.3%.

Taiwan stocks rose nearly 2% as investors snapped up tech exporters such as AU Optronics, which are riding on growing demand for new computers, flat-screen TVs and other consumer gadgets. AU jumped 3.6%.

Intel’s lone China factory and two of China’s top chipmakers are already running at or near full capacity, senior executives told Reuters on Tuesday.

“Big tech shares are pushing the market higher because prices of DRAMs and (flat) panels are rising and we also see foreign investors coming back," said Tom Tang, a vice president at Masterlink Investment Advisory.

Tokyo’s benchmark Nikkei index climbed 1.2% to an eight-week high as chip shares rose, with Elpida Memory also rising on a media report of upbeat earnings.

Global stocks were already on a firm note before the Fed’s widely expected announcement, buoyed by Standard & Poor’s move to affirm Greece’s BBB-plus credit rating.

S&P’s decision to end its review for a ratings downgrade removed a potential blow to Greece’s efforts to raise capital in international markets to plug a gaping fiscal shortfall.

However, the credit rating agency did say Athens was still at risk of a rating cut in the next 18-24 months if if failed to implement a deficit cutting plan.

The yen gave up early gains and fell to 90.60 to the dollar after the Bank of Japan loosened policy, bucking the general trend in Asia where central banks are tightening or close to tightening policy to curb inflationary pressures.

The BOJ’s decision to double to ¥20 trillion ($221 billion) the funds available to banks for three-month loans was in line with expectations and marked only a modest relaxation in policy that would have limited impact on the economy or markets, analysts said.

As expected, the BOJ also left its policy rate unchanged at 0.1 percent.

Although the world’s second-biggest economy emerged from recession in the second quarter of 2009, it is suffering from persistent deflation that some lawmakers fears could tip the economy back into a downturn.

The dollar hovered near one-month lows against a basket of currencies as ultra-low US interest rates diminished its yield appeal of the dollar against higher-yielding currencies. Many economists do not see a US rate rise until late in the year.

Meanwhile, the yuan hit a one-month low against the dollar in three-month offshore non-deliverable forwards on easing market expectations of yuan appreciation as China stood firm in the face of hightened US pressures for a yuan rise. China said on Wednesday it “could not be any clearer" in its repeated commitment to a stable exchange rate after the US Congress threatened to levy duties on some Chinese exports if it fails to revalue its currency.

Gold rose a fifth of a percent to $1,126.50 per ounce, extending its gains of more than 1 percent the previous day as a US Federal Reserve decision to hold interest rates unchanged burnished the metal’s investment appeal.

US crude futures gained 59 cents to $82.29 a barrel after rising $1.90 the previous day, supported by weakness in the dollar and expectations that producer group OPEC will keep oil output cuts in place.

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