Hong Kong: The dollar extended losses in Asia while most equities rose after the head of the Federal Reserve hinted at a softer pace of interest rate hikes, though investors remain wary about the weekend's crunch trade talks between Donald Trump and Xi Jinping.
US markets were sent soaring Wednesday after Fed chief Jerome Powell said borrowing costs were still historically low but only "just below" the neutral level, a rate that neither stimulates nor restrains the economy.
While the central bank is widely expected to lift rates, his comment was a far cry from his characterisation last month of them being "a long way from neutral".
The fear of higher US interest rates -- fuelled by a surging economy -- has been a key driver of a global equity sell-off over the past few months, while the dollar has soared as traders put cash into the US looking for better, safer returns.
Observers said the remarks provided some much-needed cheer after months of negativity and ahead of the festive period.
"Powell's dovish pivot reduces nagging concerns about vigorous interest rate hikes while providing the market with one of the best holiday gifts, a significant bounce in global equity markets," said Stephen Innes, head of Asia-Pacific trade at OANDA.
The dollar was down against its major peers as well as high-yielding and emerging market currencies, which have suffered a painful 2018. The pound even managed to strengthen despite warnings about the dire consequences of a no-deal Brexit from the Bank of England.
Among the big winners, the South African rand and Mexican peso each climbed around 1.5 per cent, while Indonesia's rupiah, the Australian dollar and Indian rupee all jumped more than one per cent.
"We have turned more positive on Asian currencies following encouraging signs that both the US and China were willing to talk at the upcoming G20 summit," Delphine Arrighi, an emerging market fund manager at Merian Global Investors in London, told Bloomberg News.
Most Asian equities tracked a rally in New York, where the Dow and S&P 500 surged more than two per cent while the tech-rich Nasdaq piled on three per cent.
Tokyo was 0.4 per ent higher, Sydney added 0.6 per cent, Singapore put on 0.7 per cent and Seoul was up 0.3 per cent. Wellington, Manila, Mumbai and Jakarta also registered strong gains.
However, profit-taking dragged Hong Kong down 0.9 per cent in the afternoon while Shanghai sank 1.3 per cent.
Powell is "taking away the concern about aggressive interest-rate increases, which resolves one of the issues that hung over the markets during the last couple of months", Bob Phillips, at Spectrum Management Group, said.
"We still have the trade war issue with China and we'll see how that works out this week. If that comes out positive, we'll have a decent rally at the end of the year."
The meeting between the leaders of the world's top two economies is being watched with trepidation following a series of mixed signals from Washington.
In the latest development ahead of Saturday's talks at the G20 in Buenos Aires, US Trade Representative Robert Lighthizer said Beijing had failed to offer "meaningful reform" on its trade policies that he says hurts US jobs.
Taking aim at "China's aggressive, state-directed industrial policies", Lighthizer also threatened tariffs on Chinese autos.
His comments come a day after top White House advisor Larry Kudlow told journalists Trump "said there's a good possibility we can make a deal" and two days after the president warned of more levies if he and Xi do not reach an agreement.
"While global equity markets are revelling in the afterglow of (Powell's comments), in the wake of US Trade Representative Lightizer's statement... it's far too early to suggest that a Santa Claus rally is in the cards," said Innes.
Oil prices remain under pressure at 13-month lows after Wednesday's plunge of about 1.5 per cent, which was fuelled by a tenth straight weekly increase in US stockpiles, adding to fears of a supply overhang.
Tokyo - Nikkei 225: UP 0.4 per cent at 22,262.60 (close)
Hong Kong - Hang Seng: DOWN 0.9 per cent at 26,455.31
Shanghai - Composite: DOWN 1.3 per cent at 2,567.44 (close)
Pound/dollar: UP at $1.2838 from $1.2824 at 2140 GMT
Euro/pound: UP at 88.67 pence from 88.61 pence
Euro/dollar: UP at $1.1382 from $1.1369
Dollar/yen: DOWN at 113.30 yen from 113.65
Oil - West Texas Intermediate: UP 10 cents at $50.39
Oil - Brent Crude: DOWN seven cents at $58.69 per barrel
New York - Dow Jones: UP 2.5 per cent at 25,366.43 (close)
London - FTSE 100: DOWN 0.2 per cent at 7,004.52 (close)