Asia Stocks Mostly Gain On Fed's Low Rates Pledge

By Salon Staff

Published January 26, 2012 4:09AM (EST)

BANGKOK (AP) — Asian stock markets were mostly higher Thursday after the U.S. central bank pledged to keep interest rates low for another three years to nurture the country's stubbornly slow economic recovery.

Hong Kong's Hang Seng Index jumped 1.1 percent to 20,322.51 on its first trading day since the Chinese New Year holiday. South Korea's Kospi rose 0.2 percent to 1,956.14. Benchmarks in Singapore and New Zealand also rose.

Japan's Nikkei was 0.4 percent lower at 8,846.96, following strong gains a day earlier. Markets in Taiwan and mainland Chinese remained closed for the Chinese New Year. The Australian market was closed for a public holiday.

On Wednesday, the U.S. Federal Open Market Committee said it was unlikely to raise interest rates before late 2014. It had previously said it expected to keep rates low into the middle of 2013.

The Fed cut rates to near zero in December 2008, during the financial crisis, and has held them there ever since. The announcement was a sign that the Fed expects the economy, which is improving, to need significant help for three more years.

Analysts said stock buyers rejoiced that the Fed was leaning toward promoting economic growth.

"With the FOMC sending out a strong signal that monetary policy is likely to remain accommodative for even longer than previously expected, risk assets are in a very good position," said Stan Shamu of IG Markets in Melbourne.

Wall Street welcomed the news, with the Dow Jones industrial average closing up 0.6 percent at 12,756.96 — the highest close since May 10. The Standard & Poor's 500 index rose 0.9 percent to 1,326.06. The Nasdaq composite index gained 1.1 percent to close at 2,818.31.

Benchmark crude for March delivery was up 39 cents to $99.79 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose by 45 cents to finish at $99.40 per barrel in New York on Wednesday. At one point it was as high as $100.40.

The prospect of low interest rates weighed on the dollar, since it reduces the returns that investors get from holding assets denominated in that currency. The euro rose to $1.3103 from $1.3084 late Wednesday in New York. The dollar fell to 77.75 yen from 77.81 yen.

Salon Staff

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