Dovish comments from U.S. Federal Reserve Chairman Ben Bernanke sparked a sharp rally across financial markets on Thursday, as relief followed weeks of jitters that the central bank could take back some of its hefty monetary stimulus soon.
Speaking at a conference on Wednesday, Bernanke said the U.S. economy continues to need a highly accommodative monetary policy.
This had an immediate impact on asset prices that have fallen sharply on Fed tapering fears. Gold prices jumped more than 2 percent to around $1,289, their highest level in more than two weeks and the 10-year Treasury yield fell to around 2.59 percent in Asia from around 2.67 percent in late New York trade – about 17 basis points below a two-year peak hit in the wake of Friday's strong U.S. jobs data.
The U.S. stock futures, meanwhile, point to a firm opening for Wall Street shares, which were closed when Bernanke made his comments.
"I don't see any reason why we would have a bear trend in U.S. stocks if the Fed stays in the game and they've just indicated that they are going to," said Anthony Scaramucci, managing partner at SkyBridge Capital in New York. "I don't see the Fed doing anything to upset this fragile global recovery," he added.
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In addition to Bernanke's comments, minutes from the Fed's latest meeting showed that officials wanted more evidence of a recovery in the jobs market before easing its monetary stimulus program.
"The June minutes provided little new information on the most likely date of QE [quantitative easing] tapering or the likelihood of strengthening the forward guidance," analysts at Goldman Sachs said in a note.
Still, analysts said an improving outlook for the U.S. economy meant that an unwinding of the Fed's $85 billion-a-month bond buying program remained on the cards and so the outlook for markets remained unchanged.
"Don't get fooled here. The long-end of the bond market [yields] was rising quite substantially. Many Fed members had come out to say that this was an overreaction – we've seen this before, you start believing them and before you know it, they are talking tapering again and you get smashed," David Bloom, global head of currency strategy at HSBC, told CNBC Asia's "Squawk Box."
"They are going to taper, it's just a matter of timing," he added.
The dollar, one beneficiary of the expectations for an unwinding of Fed monetary stimulus, fell sharply against major currencies in the wake of Bernanke's comments.
The dollar index was down more than 1 percent to 82.96 and more than 2 percent lower from this week's three-year peak. The euro jumped to a three-week high at about $1.32 and the yen strengthened to about 98.35 per dollar, its strongest level in almost two weeks.
Analysts said the dollar's upward trend against major currencies had not changed.
(Read More: In the Race to the Bottom, US Dollar Falls Behind)
"The U.S. economy is improving, the Europeans are still talking about negative interest rates and [Bank of England Governor Mark] Carney was dovish," said HSBC's Bloom, referring to comments last week from the European Central Bank and Bank of England that suggested they would keep rates low for some time.
"The Fed is on the road to rate hikes whether it's in 2015 or not and it's the differential in interest rates between the U.S. and the rest of the world that matters and will power the dollar ahead," he said.
-By CNBC's Dhara Ranasinghe; Follow her on Twitter: @DharaCNBC