Asia markets mostly closed up on Fed, Nikkei falls on stronger yen

Most Asian markets advanced Thursday as investors cheered clarity from the U.S. Federal Reserve and a rise in oil prices, but Japan shares lost ground as the yen strengthened.

The Fed left rates unchanged at between 0.25 percent and 0.5 percent at its March meeting, but it cut its projection for the number of 2016 rate hikes from four to two, and projected just two hikes in 2017. Uncertainty over how many times the Fed would hike rates this year has weighed on markets since the central bank raised them for the first time in almost nine years in December.

"This was far more dovish than markets had expected, resulting in sharp rallies in commodities, emerging markets and commodity-related currencies," Angus Nicholson, market strategist at spreadbetter IG, said in a note Thursday.

Japan's Nikkei 225 index closed down 0.22 percent, or 38.07 points, at 16,936.38, extending its fall over the previous two sessions, as the yen strengthened against the dollar and Japan's February exports fell.

The dollar broadly lost ground after the Fed decision, causing the yen to strengthen. At 3:30 p.m. SIN/HK time, the dollar was fetching 111.83 yen, down from levels around 113.70 yen before the decision. A stronger yen typically weighs on Japan's export-heavy market.

Across the Korean Strait, the Kospi closed up 0.66 percent, or 13.09 points, at 1,987.99. Hong Kong's Hang Seng index closed up 1.21 percent, or 246.11 points, at 20,503.81.

Chinese markets traded higher; with the Shanghai composite closed up 1.22 percent, or 35.113 points, to 2,905.543 and the Shenzhen composite rose 3.562 percent, or 60.965 points, to 1,772.43.

Australia's S&P/ASX 200 closed up 0.96 percent, or 49.13 points, at 5,168.15, buoyed by the energy subindex's 2.75 percent rise and the materials sector's 2.32 percent gain.

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In the currency market, the Australian dollar strengthened against the greenback, with the pair trading at 0.7634 as of 3:29 p.m. HK/SIN time, compared with levels around 0.7421 around the time of the Fed decision.

"A risk for Australia though is that the Fed's continuing dovishness maintains recent upwards pressure on the value of the Australian dollar, which rose 1.5 percent on the Fed's announcement," Shane Oliver, head of investment strategy and chief economist at AMP Capital said in a note Thursday.

"This could go further in the short term, but with the Fed still heading towards rate hikes (albeit ever more gradual) and the Reserve Bank of Australia still biased towards cutting rates, we still see the Australian dollar ultimately resuming its downtrend."

Major resource producers were also higher, with Rio Tinto up 2.44 percent, Fortescue Metals gaining 9.05 percent and BHP Billiton 2.43 percent higher.

In China, the yuan strengthened against the dollar, with the dollar/yuan pair trading down 0.63 percent at 6.4954 at 3.29 p.m. HK/SIN time. Before the market open, the People's Bank of China (PBOC) fixed the yuan midpoint rate at 6.4961, compared with Wednesday's fix of 6.5172.

Kzuhrio Nogi | AFP | Getty Images

In commodity markets, gold prices was mostly unchanged at $1,261.76 per ounce at 3:28 p.m. HK/SIN time after jumping more than 2 percent overnight. Gold is generally considered a hedge against inflation and some analysts believe a slower trajectory for Fed hikes may allow inflation to rise.

U.S. crude futures were higher by 2.18 percent at $38.31 a barrel after settling up 5.8 percent in U.S. trade overnight, while Brent crude futures were up 1.36 percent, or 55 cents, at $40.88 after rising 4 percent overnight.

The gains came after weekly crude oil inventories showed a smaller-than-expected build-up, and there was news that major oil producers would meet on April 17 in Qatar to talk about a production freeze.

"One small step for U.S. oil production decline, one big leap for oil prices," Daniel Ang, an analyst at Phillip Futures, said in a note Thursday. "Lately, it has been uncommon to see inventories increase less than estimates and when it did, markets went hysterical."

Energy plays in the region were higher, with Australia's Santos surging 5 percent, Woodside Petroleum up 2.23 percent and Oil Search 2.76 percent higher, while Japan's Inpex gained 2.4 percent and Japan Petroleum added 1.53 percent. Chinese mainland oil plays were mixed, with Sinopec Shanghai Petrochemical up 1.39 percent and China Petroleum unchanged, while PetroChina was lower by 0.13 percent.

Major U.S. indexes finished up, with the Dow Jones industrial average gaining 0.43 percent to 17,325 points, the S&P 500 0.56 percent higher at 2,027 and the Nasdaq composite climbing 0.75 percent to 4,763.

--Reuters contributed to this report.

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