The Australian dollar fell and bonds jumped on Wednesday on decreased chances of an interest rate rise in February, while Japanese bank shares surged on a report of a possible delay in new global bank capital rules.
Dealers scrambled to slash bets that the Reserve Bank of Australia would raise rates a fourth consecutive time after a top central banker said rates were already back in a normal range.
The news came as the Aussie was already in retreat after data showed the economy grew at a slower-than-expected pace in the third quarter.
In Japan, shares of leading banks posted double-digit gains, pushing up the Nikkei index <.N225>, on a media report that global bank regulators were effectively delaying stricter rules to prevent another financial crisis.
Shares of No.2 Mizuho Financial Group <8411.T> vaulted nearly 18 percent and third-ranked Sumitomo Mitsui Financial Group <8316.T> surged 15 percent.
Stocks in much of the rest of Asia eased as investors awaited to see if a statement from the U.S. Federal Reserve later in the day (2:15 p.m. EST) would signal any policy changes.
* The Australian dollar fell 0.6 percent to US$0.9005 to its lowest since November 27, while March bill futures were up 0.12 point, indicating investors now see a lower chance of a policy rate rise in February after the central bank remarks and Q3 GDP data.
* The U.S. dollar was largely unchanged, near a 2-1/2-month high against the euro ahead of the final U.S. central bank policy meeting of 2009. A surge in wholesale prices in November has increased speculation the Federal Reserve could tinker with language in its statement to keep inflation expectations at bay.
* Nikkei share average up 0.9 percent after briefly hitting the highest intraday level since October 27.
One of the biggest problems for the Nikkei has been supply and worry about additional equity fundraising, and if this news is true it means that we don't need to worry about this, especially in connection with banks, for a while, said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities in Tokyo.
* The MSCI index of Asia Pacific stocks outside Japan was down 0.5 percent <.MIAPJ0000PUS>, weighed by the materials and consumer staples sectors.
* March 10-year U.S. Treasury futures were up slightly after the cash market took a beating overnight after energy costs helped to push up producer prices in November for the biggest monthly rise since August.
(Additional reporting by Elaine Lies in Tokyo)
(Editing by Kim Coghill)