Asia shares climb, dollar slips on Fed wagers

By Wayne Cole

SYDNEY (Reuters) - Asian shares jumped on Thursday and the dollar backed off highs on expectations the Federal Reserve would be confident enough of the U.S. economy to raise rates in December but would then proceed with great caution on further tightening.

The pick-up in risk sentiment combined with the dip in the dollar gave commodities a reprieve from recent selling, with oil and gold inching higher.

Financial spreadbetters expected opening gains of 0.45 percent for Britain's FTSE 100, 0.89 percent for the German DAX and 0.88 percent for France's CAC 40.

The Bank of Japan surprised no one at its regular policy meeting by maintaining the current pace of asset buying, though many still suspect it will have to ease again at some point to force inflation higher.

Japan's Nikkei firmed 1.07 percent, brushing aside a disappointing report on exports and imports.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.98 percent, while Australia's main index jumped 2 percent for a third straight session of gains.

After a slow start, Chinese markets caught the better mood and the CSI300 index of the largest listed companies in Shanghai and Shenzhen added 0.9 percent.

Sentiment was supported by the Dow which ended Wednesday with a gain of 1.43 percent, while the S&P 500 added 1.62 percent and the Nasdaq 1.79 percent.

Minutes of the Fed's last policy meeting showed most members were ready to sanction a lift-off in December as long as further moves were then highly dependent on the economy continuing to perform well.

"If - when - they lift rates in December, the Fed will likely be very aggressive in highlighting the idea of a very gradual pace," said Tom Porcelli, chief U.S. economist at RBC Capital Markets.

"We fully expect Yellen to promote this heavily at her press conference," he added, referring to what Fed Chair Janet Yellen will say after the pivotal Dec. 15-16 policy meeting.

The bond market seemed to get the message with longer-term debt outperforming and the yield curve flattening noticeably. While two-year yields rose 3 basis points, those on 30-year paper actually dipped a basis point.

The premium offered by U.S. two-year debt over its German counterpart also yawned out to 124 basis points, the fattest margin since 2006 and a positive for the dollar.

However, being long dollars has been a very crowded trade and investors decided to book some profits in the wake of the Fed minutes. Against a basket of currencies the dollar dipped 0.5 percent and away from a seven-month peak.

The euro edged up to $1.0707 and off a seven-month trough around $1.0615. The dollar also eased against the yen to 123.25, after touching a three-month peak of 123.67.

Minutes of the European Central Bank's last policy meeting are due later on Thursday and will likely reinforce expectations of further easing in December.

In commodity markets, gold added 0.6 percent to $1,077.20 an ounce having been at its lowest since early 2010. Zinc, copper, lead and nickel were all near their lowest in five to seven years. [MET/L]

Oil prices rose from three-month lows on short-covering. U.S. crude gained 22 cents to $40.97 a barrel, while Brent firmed 43 cents to $44.57.

(Reporting by Wayne Cole; Editing by Eric Meijer and Richard Borsuk)