Asia Enjoys Relief Rally Over Fed Stimulus Hopes

Asian stocks hit multi-week highs on Thursday after Federal Reserve Chairman Ben Bernanke voiced his support for accommodative monetary policy, but Japanese shares underperformed on the back of a strong yen.

South Korea's Kospi and China stocks outperformed to hit three-week highs each while Australia's S&P/ASX 200 hit a new six-week high. Meanwhile, Japan's Nikkei index reversed earlier losses to add 0.4 percent in choppy trade.

(Read More: Markets Sigh in Relief on Bernanke Comments)

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Markets on Fed Watch

The minutes from the Fed's latest policy meeting released on Wednesday showed that policymakers wanted more reassurance about the strength of the recovery in the jobs market before pulling back on economic stimulus measures.

However, speaking at a conference after the minutes were released, Fed Chairman Ben Bernanke said that monetary policy would remain accommodative for the foreseeable future, even if the U.S. unemployment rate hits the Fed's target of 6.5 percent.

"The FOMC minutes can be overlooked, and to be fair they have probably just caused confusion among the market, especially as they preceded the recent strong payrolls report and subsequent back-up in rates," said Chris Weston, market strategist, IG in a note.

Shanghai Surges 3.2%

The Shanghai Composite rose above the key 2,000 level for a second straight session, hitting a three-week high on hopes that the People's Bank of China (PBOC) may ease monetary policy in order to boost growth after Wednesday's dismal trade figures.

Battered banking stocks that were crushed over fears of a credit crunch last month led the gains. Mid-sized lenders Minsheng Bank rallied 10 percent while Shanghai Pudong Development Bank rose 9.2 percent.

News that Beijing may relax rules for real estate firms spurred a rally in property stocks. Poly Real Estate and Shanghai Shimao increased 6 percent each and Gemdale added 5 percent.

(Watch Now: Stock in 60 Seconds: Poly Real Estate)

Nikkei Inches Up 0.4%

A stronger currency weighed on Japan's benchmark index, offsetting the positive impact of Bernanke's comments.

In a widely-expected move, the Bank of Japan (BOJ) kept monetary policy steady at the conclusion of its two-day meeting on Thursday, but upgraded it's economic assessment. The yen strengthened further on the news, rising 1 percent to 98.7 per dollar as investors expressed disappointment with the lack of action.

Exporters led most of the declines with electric equipment maker Yaskawa Electric and camera maker Nikon lower by 3.8 percent each.

(Read More: JPMorgan Says It's Still Not Sold on Japan)

Experts explained the dip in equity and currency markets as normal given Japan's economic transition. "This grand experiment ['Abenomics'] is multi-year so from an investor standpoint, we can be a bit patient." said Clay Carter head of international equities at Perennial Investment Partners.

Kospi 3% Higher

Seoul's benchmark index hit a new three-week high on optimism over a continuation of U.S. monetary stimulus and a stronger yen, which raises the competitive advantage of domestic exporters.

A 5 percent rally in market heavyweight Samsung Electronics and LG Electronics supported the index. Oil refiners also gained with SK Innovation rising 5.5 percent after Brent crude traded near a 3-month high.

Sentiment also improved after the Bank of Korea left interest rates unchanged at its policy review but raised its 2013 growth forecast to 2.8 percent from a previous forecast of 2.6 percent.

Australia Climbs 1%

Australian investors cheered a stronger-than-expected employment report for June. Jobs rose by 10,300 versus market expectations for a flat reading, sending the Australian dollar spiking over 1 percent to $0.9297 and driving the benchmark index to its highest levels since May 31.

"A loosening labor market will continue to take pressure off wages, leaving the RBA [Reserve Bank of Australia] with room to cut rates to support Australia's rebalancing. On balance, we still see the RBA as likely to cut rates next month," wrote economists at HSBC in a research note.

(Watch Now: Trading Australia's Strong Jobs Report)

Gold miners were the session's out performers with Perseus Mining surging 23 percent, Medusa Mining climbing 21 percent and Kingsgate rising 16 percent after prices of the yellow metal hit a two-and-a-half-week high.

By's Nyshka Chandran. Follow her on Twitter @NyshkaCNBC