Asian shares up, dollar wallows as Fed soothes inflation fears

On Wednesday, China's central bank set the yuan's daily midpoint fixing at its strongest level since June 2018 after the currency tested a key level against the dollar a day earlier, prompting state banks to step into curb the rally.

The dollar index was steady at 89.696 after touching its lowest level since Jan. 7 on Tuesday. The greenback was unchanged against the yen at 108.76 and the euro was off a touch by 0.07% to $1.2242.

Analysts at Jefferies said regional equity markets could benefit, especially given a weak dollar could help boost global trade and emerging markets by lowering global prices of goods and services.

"A weak dollar should underwrite emerging market performance despite very mixed vaccine roll-outs to date," they said in a note.

"Until the U.S. government declares the pandemic is over and job growth is running at one million plus per month, tapering is unlikely to happen...In the meantime, real rates will be heavily negative. Moreover, based on the dollar's Real Effective Exchange Rate, the greenback cannot be described as being 'cheap'."

The benchmark U.S. Treasury yield edged higher after falling to multi-week lows on Thursday on easing inflation concerns and a strong auction of 2-year notes.

The 10-year yield rose to 1.5706%, from a close of 1.564% on Tuesday, but the two-year yield dipped to 0.1485%, from a close of 0.152%.

Oil was little changed as traders weighed expectations of improving demand in the U.S. against the possibility of new supply from Iran. Global benchmark Brent crude was up 3 cents at $68.68 and U.S. crude fell 7 cents to $66 per barrel.

Bitcoin was up 0.88% at $38,736.99 despite China's northern region of Inner Mongolia escalating a campaign against cryptocurrency mining on Tuesday, days after Beijing vowed to crack down on bitcoin mining and trading.

Spot gold added 0.17% to $1,902.58 an ounce.