Asian equities extended rally in afternoon trade as markets continued to recover from trade war fears. The dollar slipped after Beijing announced retaliatory tariffs that targeted more than 5,000 U.S. products worth $60 billion. The new tariffs would take effect on Sep 24, China’s Ministry of Finance said in a statement. The country’s commerce ministry also filed a complaint to the World Trade Organization (WTO) against the U.S. Trump administration previously stated that the U.S. would impose tariffs on another $267 billion of additional imports if China retaliates. Meanwhile, the Japanese yen, which is widely considered a safe asset during periods of risk aversion, weakened to near a two-month low of 113.18 earlier in the session as markets took comfort from the fact that the new U.S. tariffs were set at 10% for now rather than the previous expected 25% tariff. On the policy front, interest rates were left unchanged at -0.1% by BOJ, in line with the market expectations. While leaving policy unchanged, inflation continuing to be the bugbear of both the government and BoJ, optimism towards the economy was reflected in the monetary policy statement despite rising tensions towards a trade war.

In currency markets, EURUSD inched up 0.02 percent at 1.1675 GBPUSD shook off modest overnight losses and rose to $1.3175, its highest since July 26. The yen showed little reaction to the Bank of Japan's well-anticipated decision to keep monetary policy steady trading above 112.00.

In commodities, Crude oil prices consolidated after rallying the previous day on signs that OPEC would not be prepared to raise output to address shrinking supplies from Iran, and as Saudi Arabia signalled an informal target near current levels. Brent crude futures was nearly flat at $79.04 a barrel following a rally of 1.25 percent.

Gold prices Gold prices were slightly higher on Wednesday as the dollar softened following the latest trade news trading above 1200 handle.

Economic calendar has significant upcoming news. In UK, focus will be on August inflation figures scheduled for release later this morning, with the Pound likely to respond, though barring a material deviation from forecasts, any moves are likely to be short lived with focus continuing to be on Brexit negotiations, the annual rate of inflation forecasted to soften to 2.4%. ECB President Draghi could provide some direction later in the day should any references be made to monetary policy.