HONG KONG: Stocks and currencies in emerging markets led an Asian rally yesterday following a surprise decision by the US Federal Reserve to keep its massive stimulus programme intact.
The announcement to hold off winding down its US$85 billion a month bond-buying fuelled a buying spree on Wall Street, sending the Dow and S&P 500 to record highs.
And Asia took up the baton yesterday, with under-pressure developing economies breathing a sigh of relief after suffering a heavy sell-off in August as investors bet on the US Fed tightening its monetary policy.
In Tokyo the Nikkei rose 1.80 per cent, or 260.82 points, to 14,766.18 Sydney rallied 1.10 per cent, or 57.4 points, to finish at a new five-year high of 5,295.5, and Wellington added 1.05 per cent, or 49.21 points, to end at 4,753.03.
Seoul, Shanghai and Taipei were closed for public holidays.
In an eagerly awaited announcement, the Fed said it would keep the stimulus in place as it wanted to further gauge the economic impact of public spending cuts and a spike in interest rates in the past four months.
Instead it cut its growth forecast for this year and next as chairman Ben Bernanke warned of possibly "very serious consequences" from a brewing political battle in Washington over a new budget and the US debt ceiling.
"The Federal Reserve's policy is to do whatever we can to keep the economy on course. And so if these actions led the economy to slow, then we would have to take that into account, surely," he told reporters.
He said the bank could still start reducing the bond-buying - which aims to hold down long-term interest rates - in the next three months, but only if the economic outlook improves.
"There is no fixed calendar," he said.
Wall Street welcomed the announcement. The Dow rose 0.95 per cent, the S&P 500 climbed 1.22 per cent and the Nasdaq was up 1.01 per cent.
In other markets:
* Jakarta surged 4.65 per cent to close at 4,670.73
* Mumbai jumped 3.43 per cent to 20,646.64
* Manila soared 2.81 per cent, or 177.74 points, to 6,511.70
* Bangkok rose 3.47 per cent to 1,489.06. AFP