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Asian Markets Rally as Fed Holds Status Quo

CNBC.com
Thursday, 25 Jun 2009 | 5:08 AM ET

Asian stocks rallied for a second day Thursday after the Federal Reserve reinforced that interest rates will be kept at a record low for a while, but Treasuries extended losses as the Fed shied away from boosting its debt purchases.

The Fed left interest rates near zero percentbut tweaked its statementto say that financial markets had improved and signaled less concern about deflation, even while repeating the economy will remain weak. But the Fed did nothing to ramp up its hefty buying of U.S. Treasuries and mortgage-related bonds, disappointing some market players hoping for more action to stem the jump in Treasury yields that has threatened the economy's recovery.

The U.S. dollar gave up some of its gains scored on relief the Fed was not doing more to monetise debt, surrendering some ground to higher-yielding currencies, such as the Australian dollar, on the rise in stocks. The dollar index, a gauge of its performance against six major currencies, slipped 0.1 percent to 80.456. Against the yen , the dollar edged up. The euro was up also higher against the greenback. The dollar showed little reaction to comments from a Chinese Communist Party researcher that China should buy more goldbecause the U.S. currency is poised for a fall and the metal is needed to support a greater international role for the yuan. Crude oil prices fell below $69 a barrel on the dollar's gains and rising U.S. product stocks.

Japan's Nikkei 225 Average climbed 2.2 percent on Thursday for its best day in over a month, buoyed by property shares climbing on expectations for economic recovery and exporters boosted by a weaker yen. Aozora Bank and Shinsei Bank soared on news they were in merger talks, while Tokyo Electron and other tech shares rose after their U.S. tech peers drew strength in the wake of stronger-than-expected quarterly results from software maker Oracle.

Seoul shares finished up 2.1 percent, led by key commodities and technology blue chips such as Samsung Electronics, and gains in financial issues including KB Financial Group.

Australian shares rose 1.3 percent as resource stocks were boosted by firmer metals and oil prices and the IMF's upward revision of economic growth prospects buoyed companies relying on domestic growth.

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Hong Kong shares jumped 2.1 percent following an unexpected pick-up in U.S. consumer durable data, while interest-rate sensitive stocks climbed after the U.S. Fed kept its policy steady. Exchange operator Hong Kong Exchanges & Clearing jumped 3.3 percent, despite fickle turnover in recent sessions, on expectations of closer co-operation with the southern Chinese province of Guangdong.

Singapore's Straits Times Index gained 1.3 percent. Singapore Telecommunications
moved higher after an upgrade by BNP Paribas, which raised its target price for the telco.

China's Shanghai Composite Index ended flat, as electricity generators continued to rise on hopes for further jump in power output in summer. Shares in Sinopec rose in Shanghai following its parent's deal to buy Swiss oil explorer Addax Petroleum for $7.24 billion.