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Asia stocks set to end week higher, dollar left in doldrums by Fed Thu Mar 16, 2017 | 11:19pm EDT

By Nichola Saminather | SINGAPORE

Asian stocks advanced on Friday, set for their best week since July, while the dollar continued the slide that began after the Federal Reserve indicated it was unlikely to speed up monetary tightening.

The dollar index, which tracks the greenback against a basket of six trade-weighted peers, retreated 0.1 percent to 100.26. It hit a five-week low on Thursday, and is down almost 1 percent for the week.

The dollar was steady at 113.32 yen but is on track to post a 1.2 percent loss for the week.

While the Fed raised interest rates by 25 basis points on Wednesday, it kept to its original forecast of three rate hikes this year, disappointing investors who were expecting a bump up to four.

U.S. Treasury yields, which slid after the decision, staged a recovery on Thursday and continued to rise on Friday.

The 10-year yield was at 2.5402 percent, from its last close of 2.524.

"The story in global markets over the past 24 hours has centered on a broad-based tightening of monetary policy conditions (and the perception of future tightening)," Chris Weston, chief market strategist at IG in Melbourne, wrote in a note.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3 percent, set to end the week with a 3.5 percent gain, its biggest increase since the week ended July 15.

Japan's Nikkei lost 0.3 percent, and is poised for a 0.4 percent loss for the week.

Chinese stocks were steady, set for a 1.6 percent increase for the week. Hong Kong's Hang Seng index rode the positive regional trend, staying on track to log a 3.4 percent gain for the week, its biggest since September.

MSCI's all-country world stock index, held near Thursday's all-time high on Friday, on track to end the week 1 percent higher.

Overnight, Wall Street was subdued following strong gains after the Fed's rate decision. The Nasdaq was flat, while the Dow and the S&P 500 posted losses.

But European shares were upbeat following the election victory of Dutch Prime Minister Mark Rutte, who defeated anti-immigration, anti-European Union rival Geert Wilders.

"Shares remain vulnerable to a short-term pull-back as investor sentiment toward them is very bullish and a lot of good news has been factored in – but there is a risk that any pullback may not come until seasonal weakness kicks in around May," Shane Oliver, head of investment strategy at AMP Capital, wrote in a note.

The euro, which touched its highest level in 5-1/2-weeks early on Friday, hovered near that level at $1.0773, after two days of strong gains. It is set to end the week up 0.9 percent.

Sterling inched lower to $1.2351. On Thursday, it jumped to a two-week high after a decision by the Bank of England to hold interest rates steady, while hinting it might raise them soon.

In commodities, oil prices rose slightly, supported by a weaker dollar.

U.S. crude climbed 0.2 percent to $48.84 a barrel, set to end the week 0.7 percent higher. It touched its lowest level in 3 1/2 months early this week on concerns about a supply glut in the U.S., but data on Wednesday showing a small decline in stockpiles there helped lift prices.

Global benchmark Brent added almost 0.1 percent to $51.78 a barrel, headed for a 0.8 percent weekly gain.

Gold was little changed at $1,226.76 an ounce, poised to post a gain of 1.8 percent for the week, its first in three, driven by the Fed's more moderate monetary policy stance.


(Editing by Simon Cameron-Moore)