(Reuters) – Asian share markets followed the dollar higher on Monday as the prospect of further policy stimulus in China and Europe whetted risk appetites while sending the euro skidding.
The single currency was matching 28-month lows in early trade having shed 1.2 percent on Friday when European Central Bank President Mario Draghi surprised by declaring his commitment to fighting deflation.
That came hot on the heels of an unexpected cut in interest rates from the People’s Bank of China, and sources told Reuters Beijing was ready to ease further to head off slowing inflation.
“The big change is how much more supportive we expect major central banks to be. A mild pickup in growth, low inflation and supportive monetary policy all bode well for risk assets,” said analysts at Barclays.
“We are especially bullish on Japanese equities, currency hedged. The Japan macro trade has far more room to run.”
Tokyo’s market was closed for a holiday on Monday, but MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.24 percent. Australia’s main index climbed 0.9 percent.
The Dow and S&P 500 both added 0.5 percent on Friday, while the Nasdaq put on 0.24 percent. Germany’s DAX and France’s CAC rose nearly 3 percent in anticipation of more action by the ECB.
“We will do what we must to raise inflation and inflation expectations as fast as possible,” Draghi told an audience of bankers in Frankfurt, seemingly inching closer to outright purchases of government bonds.
The comments took a heavy toll on the euro which was down at $1.2367 having shed almost two cents on Friday. That was just a whisker away from a two-year low of $1.2358 plumbed earlier in the month.
Against the yen, the euro fetched 145.77, having dropped from a high of 148.43 on Friday.
The greenback was at 117.81 yen, off a seven-year high of 118.98 set last week. It faded somewhat on Friday after Japanese Finance Minister Taro Aso said the yen’s recent fall was “too rapid” and undesirable.