* Fed pause seen whetting hunger for risky assets
* Stocks rise helped by strong Wall Street earnings
* Silver rebounds after sharp losses
By Saikat Chatterjee
HONG KONG, April 27 (Reuters) - The U.S. dollar plumbed a near 3-year low against other major currencies on Wednesday before a Federal Reserve decision that is expected to reinforce an ultra-easy policy stance and drive more capital to buoyant emerging Asian stock markets.
While Fed chairman Ben Bernanke is expected to paint a cautious picture on the economy's outlook, his Asian counterparts by contrast are still tightening monetary policy and using currency appreciation to check price pressures. [ID:nN1941922]
That has given new legs to the "carry trade", in which investors borrow in a low-yielding currency to invest in higher-yielding assets or currencies. Investors have been snapping up high-yielding currencies like the Australian dollar and South Korean shares , while showing heavy interest in an upcoming dollar bond from emerging market favourite, Indonesia.
Market players also added to bearish dollar bets, especially against the euro and the Swiss Franc , on expectations the Fed will cling to a near-zero interest rate policy even as it lets a $600 billion bond purchase program wind down in June. [ID:nN1941922]
"Focus will be on the inaugural press conference and whether Bernanke is shifting along the dove-hawk scale," said Michael Sneyd, analyst at Societe Generale.
"Attention will also be on comments for how the Fed may respond to U.S. fiscal tightening. All-in-all, the meeting is likely to give the green light for risk appetite and for dollar bears to continue to be bearish."
The dollar index , which tracks its performance against a basket of major currencies, hit the lowest since August 2008 at 73.483, before cutting some losses in Asian trading.
FLOWS PICK UP
Asian shares rose, taking a leaf from the robust gains posted by U.S. indices overnight that were driven by better than expected performances from U.S. corporate heavyweights.
South Korea's benchmark KOSPI index rose to a record high for the third consecutive session before giving back some gains as investors took some profits on automaker shares, while Hong Kong shares rose, boosted by a broad rally in financials.
MSCI's index of Asia Pacific shares outside Japan rose to its highest level since January 2008, and was up 0.6 percent on the day.
Japan's Nikkei was up 1.3 percent, supported by rebounding shares of large exporters, though could face downward pressure after ratings agency Standard & Poor's revised its outlook on Japan's sovereign debt to negative after the country's triple disaster of big quake, tsunami and nuclear crisis. [ID:nTKV006458]
Offshore flows into non-developed Asian markets have picked up after a January slump, with both emerging markets equity and bond fund groups extending their longest inflow streaks since mid-January, according to fund tracker EPFR Global.
China let the yuan rise to a post-2005 revaluation high, triggering broader gains in emerging Asian currencies.
Helping the case of carry trades, the Australian dollar shot to a new 29-year peak above the $1.08 per U.S. dollar after higher-than-expected first quarter inflation suggested the Reserve Bank of Australia will eventually have to resume tightening. [ID:nL3E7FR003] .
SILVER PULLBACK
The dollar's woes have been further compounded by a recent drop in U.S. Treasury yields as rate traders bet that any Fed tightening would be a slow and gradual process.
In Asian time, U.S. 10-year note yields hovered just above a one-month low at 3.33 percent before the Fed decision. Ten-year yields are down by about 30 basis points since this month's highs.
In commodity markets, spot silver paused near the $46 per ounce level after falling by nearly 5 percent overnight.
High volatility and the expiry of U.S. silver options added to the intensity of the decline of the precious metal which nearly doubled in value between the January lows and Monday's peak.
Despite the sharp pullback in silver which rippled over into
other commodities, U.S. crude
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http://blogs.reuters.com/hedgehub (Additional reporting by Ian Chua in SYDNEY, Editing by Kevin Plumberg)