* Asia stocks climb on coming U.S. stimulus, gains muted
* Treasuries extend losses as Fed shies away from buying
* Dollar buoyed by Fed, gold down
* Kiwi hits 6-yr low after rates slashed to record low
By Eric Burroughs
HONG KONG, Jan 29 (Reuters) - Asia stocks and the dollar
climbed on Thursday as investors took heart from the U.S.
Congress making headway on a $825 billion stimulus spending
package and other efforts to stem the financial crisis.
Government bonds slid, with the benchmark 10-year U.S.
Treasury yield hitting a six-week peak after the Federal
Reserve shied away from buying Treasury debt yet as part of its
aggressive policy easing to relieve credit market strains.
The Fed said it was still mulling the extreme move to buy
Treasuries but would do so if it would help private credit
markets, emphasising its focus on bringing down borrowing rates
for consumers and companies through other asset purchases.
The U.S. House of Representatives passed the stimulus plan
in President Barack Obama's first legislative achievement since
taking office last week. Debate now shifts to the Senate.
[]
"Investor sentiment has significantly improved after the
U.S. House passed the economic stimulus plan. The legislation's
passage points to a high likelihood that additional financial
rescue measures will be taken to help banks," said Lee
Sun-yeob, a market analyst at Goodmorning Shinhan Securities.
The move came as U.S. policymakers have begun talking more
openly about creating a bad bank to warehouse the toxic
mortgage-related assets still tainting the balance sheets of
major financial institutions.
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> pushed up 1.4 percent, pulling further away
from a six-week low struck last week.
Gains were relatively muted following a 3.4 percent rally
in the U.S. S&P 500 <.SPX>. Japan's Nikkei average <> rose
0.6 percent.
Activity was limited with some countries still on holiday
for Lunar New Year. Financial markets in Hong Kong reopened
after a three-day break, but markets in China and Taiwan
remained closed.
Hong Kong's Hang Seng index <> jumped 5.2 percent after
the market reopened on Thursday, catching up with a broad rally
in global stocks fuelled by a rebound in financial shares.
Shares in HSBC <0005.HK> were up 8.6 percent, but have shed
more than 15 percent this month.
Of major world stock markets, Hong Kong and Tokyo are the
two worst performers so far in 2009 with declines of nearly 8
percent.
FED HELPS DOLLAR
The dollar edged up on relief the Fed chose not to buy
long-term Treasuries yet, suggesting the central bank was
showing some restraint on using its printing press to pump up
the economy.
Worries that the Fed's efforts to boost its balance sheet
will devalue the world's top reserve currency have dogged the
dollar since the central bank cut rates to virtually zero in
December.
"The ultimate objective is lower private-sector interest
rates," said economists at Goldman Sachs in a note to clients.
"Treasury yields are not that important in their own right, but
may be worth some intervention if conditions in other markets
can be expected to improve as a result."
The euro dipped 0.4 percent to $1.3095 <EUR=>, but the
dollar also shed 0.4 percent to 89.90 yen <JPY=>.
The New Zealand dollar was down 1.3 percent to $0.5174
<NZD=D4> slightly above a six-year low of $0.5149 hit earlier
after the country's central bank slashed rates by 1.5
percentage points to a record low 3.5 percent and left the door
open to more cuts to counter a deep recession. []
The kiwi's tumble helped drag higher-yielding currencies
down against the yen as well, leading to broad gains in the
Japanese currency.
The dollar's rise nudged gold prices down $3.40 an ounce to
$882.25 <XAU=>.
In bonds, 10-year Treasuries <US10YT=RR> dipped 5/32 in
price to yield 2.689 percent, up 2 basis points on the day
after reaching a five-week peak of 2.698 percent in early in
early Asia trade.
The slide in Treasuries pushed Japanese government bonds
lower, lifting the benchmark 10-year yield <JP10YTN=JBTC> 2
basis points to 1.275 percent.
U.S. crude oil prices dipped 61 cents to $41.55 a barrel
<CLc1> after data the previous day showed a drawdown in
distillate and gasoline inventories, while OPEC vowed to
implement steep supply cuts by the end of the month. []
(Additional reporting by Jungyoun Park in Seoul; Editing by
Tomasz Janowski)
