Asian stocks creep higher

Business Times

SYDNEY: Asian markets crept higher today as Japanese stocks rebounded and Chinese money rates eased, while the US dollar got a fillip from a report the Federal Reserve would again trim its bond buying next week.

The dollar broke the early lethargy with a hop to 104.48 yen when the Wall Street Journal reported the Fed is on track to trim its bond-buying program for the second time in six weeks, paring back by US$10 billion to US$65 billion a month.

A lackluster US jobs report had not diminished the central bank's confidence in the economy, wrote Fed watcher Jon Hilsenrath.

Investors suspect he has an inside line to policy makers and put a lot of weight on his opinion.

It was enough to nudge 10-year US Treasury yields up a couple of basis points to 2.84 per cent, following the US market holiday on Monday.

The drop in the yen helped Japan's Nikkei .N225 bounce 1.1 per cent, and dragged up markets from South Korea to Taiwan. MSCI's broadest index of Asia-Pacific shares outside apan .MIAPJ0000PUS swung round to be 0.36 per cent firmer.

Investors had a wary eye on Chinese money markets after the People's Bank of China (PBOC) announced a surprise injection of funds on Monday aimed at curbing a recent spike in rates.

Traders on Tuesday said the central bank intended to add 255 billion yuan (US$42.13 billion) to the money markets, the largest single-day injection since February 2013.

The move dragged the 7-day bond repurchase rate down to 5.25 per cent, from 6.60 per cent on Monday.

Dealers assume the authorities were attempting to avoid a repeat of the severe cash crunch that roiled markets in June.

Likewise, investors will be watching liquidity operations by the European Central Bank later Tuesday to see if it acts to correct a recent sharp rise in money rates, a tightening of conditions that could threaten the region's recovery.

The euro edged back a touch to US$1.3542, not far from Monday's two-month trough of US$1.3508. - Reuters

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