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Asian stock markets rise on Fed move

Asian stock markets have risen after the US Federal Reserves commitment to keep interest rates low cushioned the impact of its decision to scale back its stimulus programme.

Japans Nikkei 225 index rose 1.6% and Australias ASX 200 added 2%.

Asian2The US central bank said it planned to scale back its $85bn (£51.8bn) a month bond-buying programme by $10bn a month.

Analysts said the taper was less than markets had expected, which helped boost investor morale.

Scott Clemons, chief investment strategist for Brown Brothers Harriman Wealth Management, said the move indicated the central bank was in no rush to remove the stimulus.

The Fed is using a very careful language that they are going to continue to support the economy, he said. Thats part of the reason why the stock market is rallying.

Stock indexes in South Korea, Indonesia and the Philippines also rose.

This followed overnight gains in the US markets. The Dow Jones surged to close up 292.71 points, or 1.84%. Both the Nasdaq and S&P 500 indexes were up over 1% as well.

Economy is healing

The programme, called quantitative easing, was introduced by the US central bank after the global financial crisis.

The main objective was to increase the money supply and improve liquidity in the financial system in the hope of sparking economic growth and supporting employment.

The Feds governing committee cited stronger job growth as a reason for the decision to begin winding down the programme.

It forecast the unemployment rate would fall to 6.3% in 2014 from its current level of 7%.

Analysts said the Feds decision to scale back the programme also indicated that it was confident of a sustained recovery in the US economy.

It is fodder for possibly better markets because it affirms the economy is healing, said Erik Davidson, deputy chief investment officer at Wells Fargo Private Bank.

Data released last month showed that the US economy grew at an annual pace of 2.8% in the third quarter of the year.

The growth rate was faster than expected, and was an improvement on the 2.5% pace seen in the previous quarter.

A pick up in the US economy the worlds largest is likely to provide a boost to many Asian economies which rely heavily on exports to the US for their growth.

Currency moves

The Feds decision also saw the US dollar strengthen against major Asian currencies.

It jumped as much as 1.3% to a five-year high against the Japanese yen. It was trading as high as 104.36 yen to a US dollar.

The yens decline also helped boost Japanese stocks, as a weak currency makes Japanese goods more affordable to foreign buyers.

The US dollar also strengthened against the Australian and New Zealand dollars, the Indian rupee.

Nick Verdi, an analyst with Barclays Capital, said that a move away from very loose monetary policy made the US dollar a more attractive investment option.

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