Asia's stock markets rose on Wednesday, helped by stimulus hopes in China and strong earnings in South Korea, while the dollar beat a retreat as a dovish shift in tone from Federal Reserve officials had traders paring U.S. interest rate expectations.
MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 1.5% to head for its best session in 2-1/2 months. South Korea's Kospi (.KS11) was up 2.4% and eying its best day since January as chip and battery earnings impressed.
The Australian dollar made a week high on the greenback, sterling a three-week peak and the kiwi a two-month top, though moves were wobbly and small while traders waited on U.S. producer prices later in the day and Thursday's CPI data.
Several Fed official have noted that recent rises in longer-term yields may help do their inflation-fighting work.
Atlanta Fed President Raphael Bostic was applauded when he told a room full of bankers in Nashville on Tuesday: "I actually don't think we need to increase rates anymore."
Bond markets were stable through the Asia session, with benchmark 10-year Treasury yields at 4.65% - some 24 basis points below Friday's 16-year peak. Thirty-year yields, which poked above 5% last week fell 2 bps to 4.81%.
"All other things being equal, higher back end yields now mean less Fed tightening," said Spectra Markets' Brent Donnelly.
"The failure of 30-year yields to hold above 5% ... is another sign that peak fixed income (volatility) and probably peak yields have been reached for now," he said.
"I continue to think stocks go higher into year-end as they benefit from stabilisation in fixed income, oversold conditions and positive seasonality."
A Bloomberg report on China preparing stimulus to help its economy also supported the mood, especially in Hong Kong where a broad rally lifted the Hang Seng (.HSI) above 18,000 for the first time in two weeks.
The Shanghai Composite (.SSEC) rose only 0.3%.
