Amid Washington woes, some Yellen cheer for markets
Traders may well put aside worries about a U.S. government shutdown and looming deadline to raise the debt ceiling for the time being to cheer news that Janet Yellen will be nominated as the next head of the U.S. Federal Reserve.
Analysts say Yellen, currently the Fed's vice chairman, spells continuity in monetary policy, which is likely to be welcomed as markets try to assess when a highly-anticipated scaling back of the central bank's $85 billion-a-month bond-buying program will begin.
(Read more: Yellen to be named Fed chair: White House)
The appointment of Ben Bernanke's successor has been closely watched worldwide because changes in U.S. monetary policy can have global ramifications as highlighted by the recent turmoil in emerging markets on Fed tapering fears.
"The main thing is that Yellen is seen as having policies in line with [current Fed Chairman Ben] Bernanke," said Stan Shamu market strategist at trading firm IG. "The news might temporarily take traders' minds off the budget stalemate and debt ceiling - certainly it does look like it will give markets a kicker today."
U.S. stock futures traded higher in Asia hours on Wednesday, pointing to a positive open for Wall Street. The dollar meanwhile, gave up initial falls to edge up against other major currencies.
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A White House announcement that Yellen's nomination would be made on Wednesday came after the close of U.S. markets on Tuesday. Fed chief Ben Bernanke is due to step down in January and the dovish Yellen has widely been seen as a front-runner to be the next Fed chief.
Former Treasury Secretary Larry Summers was also viewed as a top candidate but pulled out of the running last month.
(Read more: Summers withdraws his name for Fed chair)
"Yellen's appointment is good for visibility in the policy outlook," Glen Maguire, chief economist at ANZ bank, told CNBC Asia's "Squawk Box." "We're in a period where there's less visibility on fiscal and monetary policy so this news about Yellen is positive."
Respite for markets?
The U.S. government has been in a partial shutdown for a week following a failure by lawmakers to reach an agreement on a budget. There are also worries that the U.S. could start to miss payments on its debt if Congress and the White House fail to reach a deal to lift the $16.7 trillion limit on government borrowing by October 17, although it would still have some cash to keep running for a little while longer.
"You have to pay attention to [the Washington impasse] - the S&P 500 is having a really tough go at the moment," said Dan Greenhaus, chief global strategist at the brokerage BTIG, in New York.
Political developments in Washington are important to the Fed debate, with worries about the fallout on the economy prompting a re-think of when Fed tapering may begin.
(Read more: House GOP doesn't get to demand ransom)
The Fed unexpectedly maintained its monetary stimulus in September and minutes from that meeting, due out later on Wednesday, will likely be scrutinized closely.
"The real question and the most important is in what manner does Yellen run the Federal Reserve," said Greenhaus.
"We know her views on monetary policy. Bernanke has been very collegial and allowed space for colleagues to make headlines and the degree to which she allows that to continue or not will be incredibly important going forward," he added.
—By CNBC.Com's Dhara Ranasinghe; Follow her on Twitter @DharaCNBC