Federal Reserve boss Jerome Powell's dovish turn on Capitol Hill reinforced expectations the central bank will cut interest rates this month

Hong Kong (AFP) - Asian markets climbed Thursday and the dollar suffered further across-the-board losses after the head of the Federal Reserve all but guaranteed an interest rate cut this month.

In the first day of closely watched congressional testimony, Jerome Powell said the case for lower borrowing costs “had strengthened” owing to headwinds caused by global trade uncertainty.

The comments sparked much-needed relief on trading floors around the world, which had suffered steep losses at the start of the week in reaction to a blockbuster US jobs report that dented hopes for a steep cut at the Fed’s next policy meeting.

US equities surged, with the Nasdaq ending at a record high and the greenback going into retreat, and the trend continued into Asia.

Hong Kong jumped 0.8 percent and Shanghai added 0.1 percent, while Tokyo ended 0.5 percent higher.

Seoul was up 1.1 percent, Sydney rose 0.4 percent, Singapore climbed 0.7 percent and Taipei put on 0.4 percent.

Manila, Mumbai, Wellington and Jakarta also shifted into positive territory.

In early trade London and Frankfurt each rose 0.3 percent, while Paris added 0.4 percent.

“One of the principal drivers of soaring stock market valuation is the thought that easy monetary policy will bolster the US economy, which isn’t struggling, and spur on an even more scintillating stock market rally for the remainder of 2019,” said Stephen Innes at Vanguard Markets.

- Oil extends rally -

While the direction of rates is expected to be downward this year, there are conflicting opinions on how deep July’s cut will be and how many more there will be this year.

OANDA senior market analyst Alfonso Esparza said: “A July rate cut is fully priced in but a stronger-than-forecast (jobs) report in June put a question mark on how many more cuts the Fed needs to make.

“The trade war with China is a major factor and if there is an agreement in the short term the central bank could leave it at one and done for the year.”

Traders are now looking forward to Powell’s second day on Capitol Hill as well as the release of inflation data, with observers saying a weak reading could revive hopes for a big July reduction.

The dollar continued to struggle, with the pound, euro and yen all building on Wednesday’s gains, while high-yielding, riskier units were also well up. South Korea’s won was 0.8 percent higher, South Africa’s rand 1.6 percent up and the Australian dollar jumped 0.7 percent.

Oil prices extended the previous day’s surge that came on the back of data showing a bigger-than-expected plunge in US oil inventories as well as a brewing storm in the Gulf of Mexico that could hit production.

WTI jumped 4.5 percent, while Brent surged more than five percent Wednesday, while British accusations that Iranian boats tried to “impede the passage” of a British tanker in the Strait of Hormuz reinforced geopolitical concerns.

The weak dollar also sent the price of gold rallying two percent to sit around $1,420.

- Key figures around 0810 GMT -

Tokyo - Nikkei 225: UP 0.5 percent at 21,643.53 (close)

Hong Kong - Hang Seng: UP 0.8 percent at 28,431.80 (close)

Shanghai - Composite: UP 0.1 percent at 2917.76 (close)

London - FTSE 100: UP 0.3 percent at 7,555.55

Euro/dollar: UP at $1.1270 from $1.1251 at 2100 GMT

Pound/dollar: UP at $1.2535 from $1.2504

Dollar/yen: DOWN at 107.99 yen from 108.46 yen

West Texas Intermediate: UP 25 cents at $60.68 per barrel

Brent North Sea crude: UP 23 cents at $67.24 per barrel

New York - Dow: UP 0.3 percent at 26,860.20 (close)