Asian shares rose on Thursday from a strong rally on Wall Street after strong economic data, and upbeat corporate guidance dampened investor interest.

Fed officials insisted that tightening policy is a long way off as the dollar nears its peak this week. However, investors remained on the sidelines with US Treasury yields still below two-week highs as this week’s jobs data will point the way for interest rates.

Crude oil prices steadied after falling to a near six-month low overnight as US data showed an unexpected surge in inventories.

Japan’s Nikkei rose 0.58%, China’s blue chips gained 0.55%, Hong Kong’s Hang Seng gained 1.24%, and its technology index soared 2.29%. MSCI’s broadest index of Asia-Pacific shares rose 0.65%.

US S&P 500 futures were little changed after rising 1.56% overnight, while the tech-heavy Nasdaq rose 2.73% to a three-month high.

PayPal’s solid financial results boosted sentiment, while data showed a steady increase in new orders for US manufactured goods.

Meanwhile, more Fed officials joined the chorus, saying further tightening was necessary to control inflation.
However, San Francisco Fed President Mary Daly said in an interview with Reuters that a 0.5 basis point rate hike might be needed at its next meeting in September, rather than another 75 basis points.

Federal Reserve Chairman Jerome Powell said last week that the central bank might consider another “significant” rate hike at its Sept. 20-21 meeting.

“Our view on this pivot (by the Fed) away from tightening has been hit pretty hard over the last 48 hours by pretty much everyone and their dog, saying we’re still going to tighten rates quite aggressively,” said Rob Cornell. INN’s head of Asia-Pacific research in Singapore.

Traders now see a 58.5% chance of a 50 basis point rise and a 41.5% chance of a sharp rise, which would be the most aggressive tightening in more than a generation.

In Tokyo trading on Thursday, benchmark US long-term Treasury yields were unchanged at around 2.71%. It rose to 2.851% overnight, its highest level since July 22, but then retreated and closed lower after Daly’s comments.

The US dollar index, which measures the greenback against six major currencies, fell 0.11% to 106.36 on Thursday after rising to 106.82 for the first time in a week.

USD/JPY was down 0.24% at 133.51 after hitting 134.55 overnight, which is extremely sensitive to US yields.
Most analysts in a Reuters poll said the dollar has yet to peak. Crude oil rose in early Asian trade, rebounding from multi-month lows the previous day after data showed weak US fuel demand.

Brent crude futures rose 53 cents to $97.31 a barrel, while West Texas Intermediate (WTI) crude futures gained 55 cents to $91.21 a barrel. Both benchmarks fell to their lowest close since February on Wednesday, at $96.50 and $90.66, respectively.