Asian shares hit 10-year highs

TOKYO (Reuters): Asian shares rallied to their highest in a decade on Tuesday with MSCI’s broadest index of Asia-Pacific shares outside Japan extended early gains, rising 0.8% to its loftiest peak since November 2007. The index got a bump higher after all three major US equity indexes closed at record highs overnight.

Japan’s Nikkei reversed early losses and jumped 1.1% to nearly 26-year highs.

“Foreign investors who were underweight on Japanese stocks in the summer are raising their investment stances to neutral and even overweight,” said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

Australia’s S&P/ASX 200 index jumped 0.8% to its highest since February 2008, bolstered by strong commodities prices.

Australia’s central bank held rates at record lows for a 14th straight policy meeting on Tuesday as expected, and signalled it would stay sidelined for months to come amid stubbornly low inflation.

The dollar index, which tracks the greenback against a basket of six major currencies, was nearly flat on the day at 94.735.

The dollar added 0.2% against the yen to 113.89 but remained well below its eight-month high of 114.737 marked in the previous session.

The euro was steady on the day at $1.1613.

The lack of clarity on the progress of US tax reform as well as leadership at the US central bank clouded the dollar’s outlook.

Lower US yields also weighed on the dollar, with the benchmark 10-year yield at 2.325% in Asian trading compared to 2.320%, its US close on Monday, when it plumbed its lowest levels in two weeks. It was at a seven-month high of 2.47% as recently as late October.

The gap between US short-dated and long-dated Treasury yields on Monday contracted to its tightest levels in a decade amid sluggish domestic inflation.

Spot gold was down 0.2% at $1,279.56 per ounce after gaining nearly one% in the previous session, easing in line with firmer Asian equities markets.