* Fed pause seen whetting hunger for risky assets
* Stocks rise helped by strong Wall Street earnings
* Silver rebounds after sharp losses
By Saikat Chatterjee
HONG KONG, April 27 (Reuters) - The U.S. dollar plumbed a
near 3-year low against other major currencies on Wednesday
before a Federal Reserve decision that is expected to reinforce
an ultra-easy policy stance and drive more capital to buoyant
emerging Asian stock markets.
While Fed chairman Ben Bernanke is expected to paint a
cautious picture on the economy's outlook, his Asian
counterparts by contrast are still tightening monetary policy
and using currency appreciation to check price pressures.
[]
That has given new legs to the "carry trade", in which
investors borrow in a low-yielding currency to invest in
higher-yielding assets or currencies. Investors have been
snapping up high-yielding currencies like the Australian dollar
and South Korean shares , while showing heavy
interest in an upcoming dollar bond from emerging market
favourite, Indonesia.
Market players also added to bearish dollar bets, especially
against the euro and the Swiss Franc , on
expectations the Fed will cling to a near-zero interest rate
policy even as it lets a $600 billion bond purchase program wind
down in June. []
"Focus will be on the inaugural press conference
and whether Bernanke is shifting along the dove-hawk scale,"
said Michael Sneyd, analyst at Societe Generale.
"Attention will also be on comments for how the Fed may
respond to U.S. fiscal tightening. All-in-all, the meeting is
likely to give the green light for risk appetite and for dollar
bears to continue to be bearish."
The dollar index , which tracks its performance
against a basket of major currencies, hit the lowest since
August 2008 at 73.483, before cutting some losses in Asian
trading.
FLOWS PICK UP
Asian shares rose, taking a leaf from the robust
gains posted by U.S. indices overnight that were driven by
better than expected performances from U.S. corporate
heavyweights.
South Korea's benchmark KOSPI index rose to a record
high for the third consecutive session before giving back some
gains as investors took some profits on automaker shares, while
Hong Kong shares rose, boosted by a broad rally in
financials.
MSCI's index of Asia Pacific shares outside Japan
rose to its highest level since January 2008,
and was up 0.6 percent on the day.
Japan's Nikkei was up 1.3 percent, supported by
rebounding shares of large exporters, though could face downward
pressure after ratings agency Standard & Poor's revised its
outlook on Japan's sovereign debt to negative after the
country's triple disaster of big quake, tsunami and nuclear
crisis. []
Offshore flows into non-developed Asian markets have picked
up after a January slump, with both emerging markets equity and
bond fund groups extending their longest inflow streaks since
mid-January, according to fund tracker EPFR Global.
China let the yuan rise to a post-2005
revaluation high, triggering broader gains in emerging Asian
currencies.
Helping the case of carry trades, the Australian dollar shot
to a new 29-year peak above the $1.08 per U.S. dollar after
higher-than-expected first quarter inflation suggested the
Reserve Bank of Australia will eventually have to resume
tightening. [] .
SILVER PULLBACK
The dollar's woes have been further compounded by a recent
drop in U.S. Treasury yields as rate traders bet that any Fed
tightening would be a slow and gradual process.
In Asian time, U.S. 10-year note yields hovered
just above a one-month low at 3.33 percent before the Fed
decision. Ten-year yields are down by about 30 basis points
since this month's highs.
In commodity markets, spot silver paused
near the $46 per ounce level after falling by nearly 5 percent
overnight.
High volatility and the expiry of U.S. silver options added
to the intensity of the decline of the precious metal which
nearly doubled in value between the January lows and Monday's
peak.
Despite the sharp pullback in silver which rippled over into
other commodities, U.S. crude <CLc1> held above the $124 per
barrel line, rising from recent lows, as Libya's civil war and
violence-tinged unrest Syria and Yemen helped limit bearish
sentiment on a price slide.[] []
* For Reuters Global Investing Blog, click on
http://blogs.reuters.com/globalinvesting
* For the MacroScope Blog, click on
http://blogs.reuters.com/macroscope
* For Hedge Fund Blog, click on
http://blogs.reuters.com/hedgehub
(Additional reporting by Ian Chua in SYDNEY, Editing by Kevin
Plumberg)
