HONG KONG: Asian traders remained broadly optimistic leading up to Thursday's crucial US interest rate decision, with most stock markets and higher risk assets extending recent gains as part of another global rally.
The Federal Reserve's policy meeting has been the key focus for global investors for weeks as bank policymakers have to weigh a healthy US recovery with a slowdown in overseas economies as well as the recent turmoil unleashed by fears over China.
However, China's crisis and its government's ability to control a sharp slowdown in the world's number two economy continue to drag on sentiment, with Shanghai's equity market seeing fresh volatility this week.
"It's hard to recall an event given so much attention from market players, the implications are far reaching and history provides absolutely no guide," Chris Weston, chief markets strategist in Melbourne at IG Ltd., said referring to the Fed decision.
"Price action in European and US equity markets suggests no one wants to be left behind if the Federal Reserve announces something risk friendly," he told clients in an email, according to Bloomberg News.
An upbeat mood across global exchanges has seen shares rise for most of this week, with US and European dealers enjoying two days of rallies.
In New York the Dow, S&P 500 and Nasdaq all tacked on healthy gains, while London and Paris were more than one percent higher.
On Thursday Tokyo ended 1.43 percent higher while Sydney tacked on almost one percent. Seoul, Wellington and Taipei also ended strongly.
However, Shanghai closed down 2.10 percent -- it surged almost five percent Wednesday after losing around six percent in the previous two sessions -- and Hong Kong was 0.86 percent lower in late trade.
- Dollar retreats -
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While the Fed is expected to lift rates by year end, global markets have moved broadly higher in the past few sessions, with economists predicting the Fed will stand back from moving this month, taking into account the recent strife in equities.
There are fears a rise now could severely hurt the struggling world economy, and especially damage emerging markets as investors withdraw cash and turn to the United States for better and safer returns.
With an increase considered less likely the dollar eased.
It stood at 120.45 yen, against 120.61 yen Wednesday in New York, while the euro was at $1.1302 compared with $1.1285.
It also retreated against higher-yielding, or riskier, currencies. The Indonesian rupiah rose 0.15 percent, the Taiwan dollar gained 0.30 percent, the Thai baht was up 0.30 percent and the South Korean won was 0.86 percent higher.
In Japan the Nikkei advanced despite Standard & Poor's decision Wednesday to downgrade its sovereign credit rating on the country, saying the government had little chance of turning round the economy or weak inflation in the coming years.
The move came a day after the central bank held back from expanding its stimulus saying the economy was growing moderately. The vast annual asset-buying scheme was a key pillar of a policy blitz launched by Prime Minister Shinzo Abe to kickstart Japan's moribund economy and conquer deflation.
On Thursday data showed Japan's trade deficit narrowed by 40 percent in August from a year earlier owing to a slump in the cost of oil imports although exports were weak as appetite in China wanes.
Oil prices enjoyed a second bump after Wednesday's surge that came in response to a report showing a plunge in US stockpiles, fuelling hopes demand may be picking up.
US benchmark West Texas Intermediate climbed 0.21 percent Thursday and Brent was up 0.54 percent. On Wednesday WTI surged almost six percent and Brent jumped more than four percent.
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