Global markets advance as Fed cuts rates to record low

Asia stocks rose to a five-week high. The MSCI Asia Pacific Index added almost 3 percent, set for its highest close since Nov. 10, while Japan’s Nikkei 225 Stock Average gained 0.5 percent, and Hong Kong’s Hang Seng Index added 1.2 percent.

On Tuesday the Standard & Poor’s 500 Index rallied 5.1 percent and the Dow Jones index rose 4.2 percent after the Fed's rate cut.

The Fed cut its target rate for overnight loans between banks to a range of zero to 0.25 percent. A senior Fed official indicated that the bank will now shift its policy focus to asset purchases as a means of providing liquidity.

In an all-out battle to protect the U.S. economy from profit-evaporating deflation, the Fed explicitly said it would take steps to make sure benchmark rates remain low for some time and to keep its balance sheet loaded with debt.

The Turkish lira traded as much as 1.75 percent stronger against the dollar on Wednesday and shares opened up more than 2 percent higher. However, the Istanbul main share index gave up early gains and traded at 26.400 levels, with some 0.5 percent rise

DOLLAR UNDER PRESSURE

Government bonds rallied after the Fed also said it would use unconventional means to revive the U.S. economy from a deep recession, including buying long-dated Treasuries, as other central banks were expected to slash their benchmark rates, ushering in an unprecedented era of cheap money.

U.S. Treasuries slid after a sharp rally overnight, but Japanese government bonds climbed, pushing down the 10-year yield to an 8-month low, on growing speculation the Bank of Japan would cut the overnight cash rate from its current low level of 0.3 percent as early as Friday.

The euro rose 0.5 percent to $1.4065, approaching a 2-1/2-month high reached overnight just below $1.4200. Since December began the euro has strengthened by around 13 cents as dealers close out of positions as the end of 2008 approaches.

The dollar dipped 0.1 percent against the yen compared to late U.S. trading on Tuesday to 88.84 yen, edging back towards a 13-year low of 88.10 yen hit on trading platform EBS late last week.

Commodities got a boost from a weaker dollar, with copper futures edging higher and oil rising above $44 a barrel on expectations OPEC will cut supplies further.