Tuesday's Asian session saw a sharp reversal of Monday's losses, with MSCI Asia-Pacific shares rising 1.7 percent, bouncing up from Monday's 6-week low. Australian shares soared 1.8 percent while Japan's Nikkei index rose 1.6 percent and South Korea's Kospi index rose 1.4 percent showing solid signs of optimism in the region.
Asia's gains followed gains in the New York session on Monday, where investors showed a bullish sentiment and optimism that last week's terror attacks in Paris would have little, if any, effect on the markets. The S&P closed up 1.5 percent yesterday and the Dow ended up 1.4 percent. The dollar strengthened further against most of its trading partners, hitting 123.405 against the yen, while the euro fell to near 7-month lows. Traders are now looking to whether the Federal Reserve will implement a proposed rate hike while the European Central Bank institutes additional monetary easing, as these divergent policies could significantly strengthen the dollar if they were to happen simultaneously.
Traders are also watching the Bank of Indonesia, out today with an announcement about whether they will ease monetary policy or hold the interest rate at 7.50 percent (where it's been since February). Economic growth in the region failed to match estimates, which tends to signal a cut in interest rates, but with inflation at a one-year low, analysts are skeptical. Many believe that the Bank of Indonesia will hold rates steady to prevent capital outflows in advance of the Fed's decision which may prompt investors to pull their money out of emerging markets.