© Reuters. A man wearing a protective face mask speaks on his cell phone in front of a Nikkei Index screen in Tokyo
By Tom Westbrook and David Henry
SINGAPORE / NEW YORK (Reuters) – Asian stocks were near record highs, the dollar fell to two-year lows and oil prices were strongest since March on Thursday as traders turned away from monetary support and hopes for fiscal stimulus in the US were affected in a festive mood.
MSCI's broadest index for stocks in the Asia-Pacific region outside Japan rose 0.3% to hit an all-time high. rose 0.2%, although both fell flat again as investors waited for US lawmakers to agree on an incentive.
The risk-sensitive Australian and New Zealand dollars climbed to multi-year highs, with the euro not far behind, and US stock futures extended gains from Wednesday.
Futures, an indicator of global energy use and growth, rose 0.7% to $ 51.45 a barrel, its highest level since early March – before overproduction fears and virus worries pushed oil prices off a cliff.
"My suspicions are that the markets are prone to prolong this rally for two reasons," said Vishnu Varathan, chief economist at Mizuho in Singapore, citing US monetary support and the good news on the horizon as vaccines roll out globally .
"If new infection numbers don't go crazy … I think there is some margin for a so-called Santa rally by the end of the year," he said. "The markets seem ready for that."
Federal Reserve Chairman Jerome Powell promised on Wednesday that he would continue to pour money into the markets until the US economic recovery is secured.
Bond traders were disappointed that he did not extend the Fed's purchase program further down the yield curve and that US Treasuries were sold for longer terms, but everyone else took this as a signal that the bank would have their backs.
"The message was clear: the Fed is ready and able to do more if necessary," said Kerry Craig, global market strategist at J.P. Morgan Asset Management in Melbourne.
"The meeting also made it clear that it is very unlikely that rates will change by the time the bond purchases are over. This means that the market focus is on the prospect of a pre-Christmas congressional fiscal package."
US lawmakers on Wednesday moved closer to an agreement on a $ 900 billion virus aid package. The top Democrats and Republicans sounded more positive than doing anything in months.
The proposal is expected to include $ 600-700 stimulus checks and expanded unemployment benefits and cannot come soon enough as U.S. COVID-19 infections soar to record levels.
"The market is buying it and the mood music from (Republican Senate Chairman Mitch) McConnell and others is good," said Gavin Friend, senior market strategist at National Australia Bank (OTC :), as he added the package, which is likely to be relatively modest.
Elsewhere, Australia's work data, which was better than expected, surged to $ 0.7591, the strongest since mid-2018, although it returned to flat levels through the interim session.
The Aussie is also betting on rising prices for iron ore, Australia's largest export, which is near its eight-year high. The surge rose to its strongest level since early 2018 after New Zealand's economic growth beat expectations.
US Treasuries fell lower and the 10-year Treasury yield rose 1 basis point to 0.9296%.
Asia's outlier was South Korea, where a record daily increase in coronavirus cases pushed the Kospi down 1% and weighed on the currency.
Cryptocurrency Bitcoin extended gains after breaking over $ 20,000 overnight. It rose 2% to $ 21,942.
Investors are drawn to its momentum – it's up 200% this year – and its supposed resistance to inflation due to its limited supply.
Gold fell 0.1% to $ 1,862.16 an ounce.