Asia faces split stock markets as US dollar slump pushes up oil and yen, STI up 0.3%

SYDNEY (BLOOMBERG) - Asian shares outside of Japan rebounded with the region'a currencies on Thursday as speculation the US Federal Reserve might opt to not raise interest rates at all this year hammered the US dollar and sparked a huge rally in oil prices.

The MSCI Asia Pacific excluding Japan Index rose 0.7 per cent at 2:49 pm Tokyo time, with Australia's S&P/ASX 200 Index up 2.1 per cent. BHP Billiton, the world's biggest mining company, rallied for the first time in four days. The Hang Seng China Enterprises Index, a gauge of mainland Chinese stocks listed in Hong Kong, jumped 1.8 per cent, while the Shanghai Composite Index advanced 1.1 per cent.

Singapore's Straits Times Index was up 0.31 per cent at 2,558.64 as of 2:18 pm, while South Korea's Kospi index gained 1.3 per cent.

The Topix fell 1.1 per cent, headed for its lowest close in more than a week.

Futures on the Standard & Poor's 500 Index added 0.4 per cent after the gauge climbed 0.5 per cent last session, amid rallies in Exxon Mobil and Chevron.

By some measures the US currency on Wednesday suffered its largest one-day percentage drop outside of the crises of 1998 and 2008, symptomatic of just how crowded bullish positions had been.

The sudden reversal provided a much-needed boost to beleaguered commodities, sending oil up no less than 8 per cent, and easing pressure on energy shares and risk appetite.

The dollar's retreat was sparked by data showing the US services sector grew at the slowest pace in nearly two years, underscoring the vulnerability of the American economy to unsteadiness abroad. The report tipped the fixed-income market's balance closer toward zero rate hikes by the Federal Reserve this year, amid prospects central banks from Asia to Europe will act to quell the turmoil that's roiled markets in 2016.

The greenback's drop helped boost the price of crude oil, along with speculation Opec and other oil producing nations have agreed to an emergency meeting on market volatility.

Oil extended it's rally on Thursday after advancing 8 per cent the previous session.

West Texas Intermediate for March delivery rose as much as 59 cents, or 1.8 per cent, to US$32.87 a barrel was at US$32.47 at 1:32 pm Hong Kong time. Brent for April settlement gained as much as 55 cents, or 1.6 per cent, to US$35.59 a barrel.

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, added 0.1 per cent after sliding as much as 1.9 per cent last session.

The won strengthened 1.3 per cent, heading for its biggest gain since November 2011, after falling every other day this week. The ringgit was buoyed by crude's recovery given Malaysia is Asia's only major net exporter of oil.

The yen dropped less than 0.1 per cent to 117.95 per US dollar following a 1.7 per cent surge, while the euro traded at US$1.1086 after also climbing 1.7 per cent in a third straight day of gains.

Commodities West Texas Intermediate crude advanced 0.9 per cent to US$32.58 a barrel. Wednesday's rebound followed oil's worst two- day slump in seven years. Stockpiles expanded last week by 7.8 million barrels to more than 500 million, data Wednesday showed.

Analysts are projecting oil prices will soar more than US$15 by the end of 2016. WTI will reach US$46 a barrel during the fourth quarter, while Brent in London will trade at $48 in the same period, the median of 17 estimates compiled by Bloomberg this year show.