Summary The news put a fire under stocks markets
HONG KONG (AFP) - Asian markets rallied and the dollar extended losses Wednesday after Federal Reserve boss Janet Yellen struck a cautious tone on the global economy that dampened the chances of an interest rate hike any time soon.
A better-than-expected reading on US growth and other improved data recently had raised hopes that the global turmoil at the start of the year may have passed and fuelled talk that the central bank might consider a further tightening of borrowing costs.
However, while Yellen pointed out that the world s top economy had "proven remarkably resilient" in the face of a global slowdown -- particularly China -- and plunging oil prices, she took a dovish stance on monetary policy this year.
Job creation remains strong, and other signs of growth firm, even as US manufacturing industry has been hit by the strong dollar and the sharp contraction in the oil and gas industry, Yellen said.
But she added that even if the US holds a moderate growth rate, the Fed has to pay heed to "broader concerns about global financial developments", including oil prices and the overall pace of growth.
She also rejected arguments, including from some Fed officials, that inflation has increased to the point that its policy-makers had to raise rates sooner rather than later.
Analysts said her comments all but sank any chances of another rate hike at April s policy meeting, while expectations for a June move were also lower.
The news put a fire under stocks markets, with all three main indexes in New York rallying, with the gains continuing in Asia.
- Dollar retreats -
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Hong Kong jumped 1.4 percent and Shanghai 1.8 percent, Sydney added 0.3 percent, Singapore rallied 1.5 percent and Seoul was 0.6 percent higher. There were also healthy gains in Wellington, Taipei, Manila and Jakarta.
"For the first time in a long time, Janet Yellen speaks and markets go up," Niv Dagan, executive director at Peak Asset Management LLC in Melbourne, told Bloomberg News. "It is clear that US interest rates won t rise any time soon."
With the prospect of US rates remaining low for some time traders moved out of the dollar, sending it tumbling against the yen, which in turn hit Japanese exporters. The Nikkei index in Tokyo was 0.3 percent lower by the break.
The greenback was at 112.62 yen Wednesday while the euro rose to $1.1294. That compares with 113.68 yen and $1.1180 in Asian trade earlier Tuesday before Yellen spoke.
The dollar was also lower against emerging market currencies, with its Australian counterpart more than one percent higher, the Korean won up 0.8 percent and Malaysian ringgit 0.8 percent higher.
Oil prices also benefited from the weaker US unit as it makes the commodity cheaper for holders of other currencies. West Texas Intermediate added 1.4 percent and Brent was one percent up.
However, the black gold is down from its recent peaks above $40 seen earlier this month owing to ongoing worries about a supply glut and overproduction.
