SYDNEY - Asian shares climbed on Thursday and the dollar backed off highs on expectations the Federal Reserve would be confident enough of the US economy to raise rates in December but would then proceed with great caution on further tightening.
The pick-up in risk sentiment combined with the dip in the dollar gave commodities a reprieve from recent selling, with oil and gold edging higher.
The Bank of Japan surprised no one at its regular policy meeting by maintaining the current pace of asset buying, though many still suspect it will have to ease again at some point to force inflation higher.
Japan's Nikkei .N225 firmed 1.2 percent, brushing aside a disappointing report on exports and imports.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 1.5 percent. Australia's main index AXJO jumped 1.4 percent, aiming for a third straight session of gains.
Chinese markets were calmer with the CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen up a slim 0.2 percent.
Sentiment was supported by the Dow .DJI which ended Wednesday with a gain of 1.43 percent, while the S&P 500 .SPX added 1.62 percent and the Nasdaq .IXIC 1.79 percent.
Minutes of the Fed's last policy meeting showed most members were ready to sanction a lift-off in December as long as further moves were then highly dependent on the economy continuing to perform well.
"If - when - they lift rates in December, the Fed will likely be very aggressive in highlighting the idea of a very gradual pace," said Tom Porcelli, chief US economist at RBC Capital Markets.
"We fully expect Yellen to promote this heavily at her press conference," he added, referring to what Fed Chair Janet Yellen will say after the pivotal Dec. 15-16 policy meeting.
The bond market seemed to get the message with longer-term debt outperforming and the yield curve flattening noticeably. While two-year yields US2YT=RR rose 3 basis points, those on 30-year paper US30YT=RR actually dipped a basis point.
The premium offered by US two-year debt over its German counterpart also yawned out to 124 basis points, the fattest margin since 2006 and a positive for the dollar.
However, being long dollars has been a very crowded trade and investors decided to book some profits in the wake of the Fed minutes. Against a basket of currencies .DXY the dollar dipped 0.4 percent and away from a seven-month peak.
The euro edged up to $1.0696 EUR= and off a seven-month trough around $1.0615. The dollar also eased against the yen to 123.25 JPY=, after touching a three-month peak of 123.67.
Minutes of the European Central Bank's last policy meeting are due later on Thursday and will likely reinforce expectations of further easing in December.
In commodity markets, gold XAU= added 0.6 percent to $1,077.20 an ounce having been at their lowest since early 2010. Zinc, copper, lead and nickel were all near their lowest in five to seven years.
Oil prices rose form three-month lows on short-covering. US crude CLc1 gained 24 cents to $40.99 a barrel, while Brent LCOc1 firmed 37 cents to $44.51. -Reuters
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