* Commodity sector boosts Asia stocks to 2-year high
* Japan's Nikkei up 2 pct, driven by short covering
* Asia braces for more capital inflows post Fed
* US bond yields in 5-7-year segment fall
By Kevin Plumberg
HONG KONG, Nov 4 (Reuters) - Asian stocks rose to their highest levels since June 2008 and commodity prices rallied on Thursday after the Federal Reserve's new bond-buying programme kept the hunt on for growth and higher yields.
European stock futures were up across the board, with the
STOXX Europe 50 futures up 1.1 percent
Japanese equities rose 2 percent and led the region after fears of a much stronger yen in the wake of the Fed decision were eased by a moderate market reaction, prompting foreign investors to cover their bets against stocks.
After falling overnight, the U.S. dollar stabilised, with dealers hesitant to add to sizable bets against the currency after the euro touched a 10-month high, though traders pushed up copper and oil prices anyway.
There was still a plethora of events coming up this week that could inject volatility into asset markets, including policy meetings of the Bank of England, Bank of Japan and European Central Bank as well as the October U.S. payrolls report.
http://link.reuters.com/buf27p
For a FACTBOX on policymaker reaction to the Fed, click
[ID:nN03131287]
For Asia, after the Fed pledged to buy $600 billion of mostly mid-maturity Treasury debt, increased capital flows into the region will probably accelerate a process of reflation but also heighten the risk of more stringent capital controls.
"By undertaking more Treasury bond purchases, the hope is that risk appetite will provide the catalyst for people to spend, particularly corporates," Sean Darby, Asia strategist with Nomura in Hong Kong, said in a note.
"We expect Asian equities to remain well bid but the additional QE will raise the spectre of capital controls in ASEAN and parts of North Asia."
Japan's Nikkei share average was up 1.9 percent <.N225>, with shares of big exporters among the biggest lifts to the index after the yen sold off overnight.
The MSCI index of Asia Pacific shares outside Japan rose 1.1 percent <.MIAPJ0000PUS>, led by the commodity and technology sectors.
Since September when speculation grew the Fed would have to print more cheap money and a chunk of those dollars would come to high-growth Asia, the index has risen 19 percent, exceeding returns on the MSCI all-country world index of 15 percent.
Hong Kong's stock market remained electric this week, with the Hang Seng up 1 percent on the day <.HSI> and extending gains so far this week to 5.6 percent compared with returns of 3.6 percent on the MSCI Asia Pacific ex-Japan index.
COPPER, CRUDE OIL GAIN
In currency markets, many dealers did not want to upset a weak U.S. dollar trend already in place before the Fed meeting, but quickly found other themes on which to trade.
The Canadian dollar was a big mover, with the U.S. dollar
climbing 0.2 percent to C$1.0066 after the Canadian government
surprised markets by blocking BHP Billiton's
The euro was at $1.4130
Some investors were beginning to reassess the risks of keeping such negative bets on the dollar after the Fed decision was largely in line with expectations.
For example, fund managers at Edmond de Rothschild Asset Management said they were maintaining their short euro versus the dollar position after the Fed news.
"After rallying so strongly in the recent past, risky assets might inspire more caution. This would benefit the USD and provide overall protection for our positions," the firm said in a note.
Economic reflation trades were rampant in the commodities
market, with three-month copper traded on the London Metal
Exchange up 1.4 percent to $8,440.00 a tonne
Crude prices were poised for a fourth day of gains, up 1
percent on the day at $85.53 a barrel
Ten-year U.S. Treasury futures rose 0.5 percent to a
one-month high
(Editing by Miral Fahmy)