* MSCI Asia ex-Japan stocks index still near 28-month high
* Dollar steadies with Fed QE2 debate raging
* Eyes on whether Japan will weaken the yen
By David Fox
HONG KONG, Oct 26 (Reuters) - Asian stocks slipped on
Tuesday but were near a 28-month high, while the dollar edged
up against the euro as dealers took some profits with debate
about the outcome of the next Federal Reserve meeting clouding
the near-term outlook.
After no major policy initiatives emerged from a Group of
20 finance ministers meeting over the weekend, investors had
kept selling the dollar on expectations that further
asset-buying from the Fed will lead to debasement of the U.S.
currency.
However, Fed officials have not been uniform in their
comments about "QE2", leading to some doubts in markets about
how big such a programme will be. Kansas City Fed President
Thomas Hoenig even called more asset buys by the central bank a
"very dangerous gamble". link []
Expectations of more cheap money flooding the financial
system have been pushing up global equity and commodity prices.
The euro was down 0.2 percent on the day at $1.3940 <EUR=>
after rising as high as $1.4080 overnight.
The dollar was largely unchanged at 80.80 yen <JPY=>, very
close to a 15-year low of around 80.41 yen and not far from a
record low of 79.75 yen.
Japan's finance minister, Yoshihiko Noda, was due to hold a
news conference that will be closely watched for warnings of
intervention after the dollar hit 15-year lows against the yen
on Monday. One trader said a fall in the dollar to below 79.75
yen could be the catalyst for further intervention.
Markets increasingly believe G20 signals against
competitive devaluation will make it tough for Tokyo to
intervene, and verbal warnings alone are unlikely to keep the
yen from breaking above record high.
G20 finance ministers pledged at the weekend to move
towards market-determined exchange rates and commit to a
variety of policies to reduce excessive external imbalances.
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For more on the G20 meeting and its implications, click
[]
For a PDF on global currency tensions, click
http://r.reuters.com/gez77p
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The MSCI index of Asia Pacific stocks outside Japan slipped
0.3 percent <.MIAPJ0000PUS> but remained close to a 28-month
high hit last week.
The MSCI's emerging market stock benchmark <.MSCIEF> was up
0.12 percent at 0200 GMT, while the dollar held up 0.01 percent
against a basket of currencies <.DXY>.
A slew of earnings due shortly has helped keep focus on
Asian stocks, but the Singapore stock exchange's <SGXL.SI> $8.3
billion takeover of Australia's ASX Ltd <ASX.AX> faced a hurdle
after key political leaders voiced concern over the deal and
hinted they may oppose it in parliament.
SGX stock was down 2.4 percent after falling 6.2 percent on
Monday.
Australia's Greens Party, which holds the balance of power
in the upper house Senate, said it had strong concerns about
the deal and may not support lifting the ASX's 15 percent
ownership cap.
For most investors, the Fed meeting next week was a
potential source of volatility.
JPMorgan Asset Management warned its clients not to become
too carried away with the prospect of quantitative easing, the
Fed's expected assets purchases.
"Strong asset price gains were seen as one of the primary
objectives of QE, with the central bank reportedly keen to
boost household wealth and to prompt risk appetite within the
economy," it said.
"As a result, strong gains ahead of the FOMC arguably
reduce the need for QE and thus increase the chances of
disappointment when the Fed finally announces the outcome of
its deliberations."
Elsewhere, U.S. light sweet crude oil <CLc1> was up 0.34
percent, to $82.23 per barrel while gold was up 0.13 percent.
(Editing by Sugita Katyal)
