Asian markets rallied Friday following a healthy performance on Wall Street, with investors largely pricing in more interest rate hikes aimed at taming runaway inflation.

The more confident mood was reflected in a dip in the dollar, which has surged in recent weeks to multi-decade highs against its major peers owing to the Federal Reserve's hawkish tilt to tighter monetary policy.

The greenback's softness came even after Fed chief Jerome Powell reasserted the bank's determination to keep hiking rates to fight prices, even at the cost of economic growth.

His warning that "we need to act now forthrightly, strongly" followed comments from his deputy Lael Brainard, who said policymakers would lift borrowing costs for as long as it takes to bring inflation down from 40-year highs.

Still, Wall Street ended in positive territory, putting markets on course for a weekly gain and easing some pressure after hefty losses in August caused by worries that rising rates would spark a recession.

"The markets have finally digested the fact that rates are almost certain to go up by 75 basis points when the Fed moves next (on September 21)," JoAnne Feeney, at Advisors Capital Management, told Bloomberg TV.

"What we are seeing though is some recognition that perhaps the sell-off that we saw in the second half of August was a bit overdone," she said.

New York's rise filtered through to Asia, where Hong Kong rose close to three percent heading into a long weekend, while Tokyo, Sydney, Shanghai, Singapore, Wellington, Mumbai, Manila and Bangkok were also well up.

London, Paris and Frankfurt also rose in early trading.

OANDA's Edward Moya said traders cheered as "Powell stuck to his hawkish script and affirmed the commitment to tighten policy until inflation is back towards their target.

"Wall Street is expecting to see some pricing pressure relief with next week's inflation report, but that shouldn't derail the current 75 basis-point pace of tightening."

There was also some cheer from news that inflation in China had eased slightly in August, giving the government more room to introduce more economy-supporting measures, though the recovery remains hostage to leaders' strict zero-Covid strategy of growth-sapping lockdowns.

On currency markets, the euro was holding well above parity with the dollar after the European Central Bank announced its own 75 basis-point rise as it warned inflation was "far too high" and likely to stay above target for "an extended period".

ECB chief Christine Lagarde suggested policy would continue to be tightened for some time.

The yen strengthened as officials began speaking up after the unit approached a 32-year low versus the greenback.

The pick-up came after Bank of Japan chief Haruhiko Kuroda met Prime Minister Fumio Kishida on Friday before saying "the rapid weakening of the yen is undesirable".

The talks were used as a sign of intent to act in support of the currency if it continued to weaken.

However, there is an expectation the Japanese unit will see more losses as the BoJ sticks rigidly to its ultra-loose policies despite the Fed's increasingly hawkish moves.

Oil prices edged up after Thursday's gains though they remain pressured by ongoing worries about the impact on demand from possible recessions caused by the rate hikes and inflation.

Weakness in China's economy and lockdowns in major cities were also cause for concern among commodities traders.

Reports that President Joe Biden was considering releasing more crude from the US strategic reserves were also weighing on the market.

Washington is concerned that prices could spike in December when European Union sanctions on Russian supplies kick in.

- Key figures at around 0810 GMT -

Tokyo - Nikkei 225: UP 0.5 percent at 28,214.75 (close)

Hong Kong - Hang Seng Index: UP 2.7 percent at 19,362.25 (close)

Shanghai - Composite: UP 0.8 percent at 3,262.05 (close)

London - FTSE 100: UP 1.0 percent at 7,335.91

Euro/dollar: UP at $1.0096 from $1.0001 on Thursday

Pound/dollar: UP at $1.1628 from $1.1500

Euro/pound: DOWN at 86.81 pence from 86.93 pence

Dollar/yen: DOWN at 142.39 yen from 144.07 yen

West Texas Intermediate: UP 1.2 percent at $84.54 per barrel

Brent North Sea crude: UP 1.3 percent at $90.32 per barrel

New York - Dow: UP 0.6 percent at 31,774.52 (close)

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Markets see much-needed bounce, but nerves remain
Hong Kong (AFP) Sept 8, 2022
Most markets enjoyed a rare advance on bargain-buying Thursday, tracking a Wall Street rally after a series of losses, while dovish comments on future interest rate hikes by Australia's central bank boss provided a boost to sentiment. The dollar resumed its upward march with the Federal Reserve and European Central Bank expected to announce more bumper increases in borrowing costs. Equities have been ravaged for weeks by fears that global central bank moves to rein in runaway inflation by ratc ... read more