TOKYO Asian share markets were set to bounce on Thursday after Federal Reserve Vice Chair Janet Yellen said the Fed has "more work to do" to help the economy, spurring U.S. stocks higher and putting the dollar on the defensive.
Yellen's introductory remarks, released ahead of her Senate confirmation hearing on Thursday to succeed Fed Chairman Ben Bernanke, supported the current ultra-easy monetary policy stance.
"As expected, Yellen did not go out of character," said Kathy Lien, managing director at BK Asset Management in New York. "Expectations for a Fed tapering in December have become overextended and as a result, we will see a weaker dollar over the next 24 hours."
The U.S. stock futures hit a record high following Yellen's comments, which came after regular U.S. share market close on Wednesday.
Both the Dow .DJI and the S&P 500 .SPX ended at record highs on Wednesday, after results from Macy's (M.N) eased some worries about the holiday season sales, boosting consumer discretionary shares.
The upbeat mood is expected to spillover into Asian trading, with Australian shares up 0.5 percent and MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rising 0.4 percent, moving way from a six-week low hit on Thursday.
A better session should greet emerging market currencies, led by Indonesia and India, which took a hammering on Wednesday on concerns about imminent tapering of the Fed's stimulus.
The euro edged up about 0.2 percent following Yellen's comments and traded at $1.3483, extending its gains so far this week to 0.8 percent.
The dollar pulled back 0.2 percent to 99.20 yen, slipping further from a two-month peak of 99.80 yen hit on Tuesday.
U.S. bond futures gained even more, with 10-year notes futures rising almost a half point, recovering some of their heavy losses after surprisingly strong U.S. jobs data on Friday.
Bond prices could gain further if Yellen hints at keeping low rates for longer.
Speculation is rife that Yellen may indicate she would like to see the jobless rate fall to six percent or below before raising rates. The Fed's current threshold for the jobless rate is 6.5 percent.
"The bond market will be looking at her comments on forward guidance. Bond yields, especially at the short end, will likely be crushed," Makoto Noji, senior strategist at SMBC Nikko Securities said.
Oil futures were supported by concerns over Libyan supply outages as strikes and protests disrupted the country's oil exports. U.S. crude futures recovered from 4 1/2-month low to trade at $93.44 per barrel. <O/R>
But copper tumbled to three-month low in heavy volume in a possible sign the global growth remains fragile - a point highlighted by euro zone's weaker than expected factory output data on Wednesday.
(Additional reporting by Gertrude Chavez-Dreyfuss in New York; Editing by Shri Navaratnam)