* Dollar falls as Summers drops out of race for Fed chair
* Summers seen as more hawkish than other main contender,
* Shares, bonds rally on expectation policy to stay easy for
* Oil slips in wake of U.S., Russia deal on Syria
By Wayne Cole
SYDNEY, Sept 16 (Reuters) - The U.S. dollar slid while bonds
and shares rallied in Asia on Monday after news Lawrence Summers
had dropped out of the race to head the Federal Reserve promised
to prolong the lifetime of super-easy money.
Further whetting risk appetite was signs of progress on
Syria, all of which helped Australian shares to a five-year peak
and South Korean shares to a six-month high.
European bourses looked keen to join the party as German,
French and pan-European stock futures started with gains of 1
percent or more.
Summers' surprise decision came just before the central bank
meets on Tuesday and Wednesday to decide when and by how much to
scale back its asset purchases from the current pace of $85
billion a month.
Investors wagered that U.S. monetary policy would stay
easier for longer should the other leading candidate for Fed
chair, Janet Yellen, get the job.
Markets had perceived Summers as less wedded to aggressive
policies such as quantitative easing and more likely to scale it
back quicker than the more dovish Yellen, who is currently
second in command at the Fed.
"Short-term interest rates are going to remain at zero for
longer than you ever would have imagined," should Yellen get the
chair, said Chris Rupkey, chief financial economist at Bank of
It was even possible a first rate rise could be pushed out
into 2016, rather than 2015 as currently planned, he said. Going
by Yellen's past speeches, she would likely make getting the
jobless rate down a priority.
"Yellen looks like the clear front-runner, and seems to be
the public's popular choice," he argued. "The Fed will shoot to
lower the unemployment rate to the full employment level, and
this means the new target could be more 5.5 percent, not 6.5
The market reaction was swift with the euro up half a U.S.
cent at $1.3355, after reaching its highest in almost
three weeks. The dollar also dropped against sterling and
the Swiss franc.
It proved more resilient against the yen, which was weighed
by its status as a safe-haven, and pared early losses to stand
at 98.92. Liquidity was lacking with Japanese markets
closed for a holiday on Monday.
Stock futures for the S&P50 index climbed 1 percent to
1,706.50, leading Asian bourses higher.
MSCI's broadest index of Asia-Pacific shares outside Japan
gained 1.5 percent to their highest since early
June. South Korean shares added 1 percent, Australia
0.5 percent and Indonesia 1.7 percent.
Markets in China bucked the trend with Shanghai's main index
down 0.3 percent.
Sentiment was also underpinned by Saturday's deal between
Russia and the United States to demand that Syrian President
Bashar al-Assad account for his chemical arsenal within a week
and let international inspectors eliminate all the weapons by
the middle of next year.
PUSHING OUT THE HIKE
In debt markets, futures for the U.S. Treasury 10-year note
leaped almost a full point, a sizable move for Asian
hours, as investors took yields lower.
There was no trading in cash Treasury paper in
Tokyo, and yields fell in early London deals.
The more distant Eurodollar contracts rallied sharply as the
market pared back expectations for how quickly the Fed might
finally start to tighten, as opposed to just tapering its
Contracts from late 2014 out to 2016 all enjoyed
double-digit gains suggesting a hike was now considered
more likely in 2015, rather than in late 2014.
The prospect of a more protracted easing cycle would be a
big relief to emerging markets from India to Brazil which have
been hammered by expectations offshore funds would switch to
developed markets as yields there rose.
Gold recouped some of last week's losses, with the metal
rising to $1,326.90 an ounce, from around $1,308.
Oil prices declined as the likelihood of a U.S. strike on
Syria seemed to recede further. Brent crude lost $1.02 to
$110.68 a barrel, while NYMEX crude shed 89 cents to