Most Asian markets, some currencies and gold rallied further yesterday as investors cautiously welcomed the United States Federal Reserve's more dovish stance on interest rates.
At a closely watched meeting, Fed officials voted nine to one to keep the benchmark Federal funds rate range unchanged between 0 per cent and 0.25 per cent.
The rate - which can affect lending rates worldwide - has been kept near zero for nine years in a bid to revive the US economy. The Fed had been expected to lift rates this month until a severe global equity sell-off and currency volatility, as well as starker signs of China's slowdown, gave it pause.
In its latest statement, the Fed warned that even as US growth strengthens, heightened global economic uncertainty could "restrain economic activity somewhat" and suppress already sluggish inflation.
Regional stock markets mostly posted solid gains. This helped support the ringgit, rupiah, baht, Korean won and Taiwan dollar to the US dollar while gold rose again, up 1.8 per cent to US$1,137.24 an ounce. The Singdollar edged up to 1.3913 from 1.3985 on Thursday.
All Asian bourses rallied yesterday except for Singapore, Japan and Malaysia. "Confusion is the word of the day because investors don't know if it's good rates are kept low, or if it's bad the economic projections are so weak," Phillip Futures investment analyst Howie Lee said.
The Fed stayed its hand on its first rate rise in nearly a decade as it admitted "uncertainties abroad" had made it more risky to tighten policy. Financial market volatility in recent months "may restrain economic activity", it warned.
Malaysia's RHB Bank, which sees a hike this year, said the delay may reflect concerns that a rise could hurt emerging markets, which account for 57 per cent of global growth - and in turn dampen US growth.
Mr Richard Jerram, chief economist at Bank of Singapore, said: "The Fed cares about how events outside the country might affect the US economy. It does not care about how Fed policy might affect emerging markets," he said.
"It is unlikely that the current stress in some emerging markets will lead the Fed to delay for long."
But the US central bank left open the possibility of a modest rate rise later this year. Fed chair Janet Yellen said some Fed officials still expect a rate rise this year if global risks and the US economy keep recovering.
Some analysts say they would have preferred the Fed to bite the bullet and raise rates as uncertainty over the timing and extent of the hike has intensified volatility.