* Rate cuts, increased liquidity improve investor sentiment
* S.Korea stocks up 8 pct on forex swap line with Fed
* Oil trades above $69, boosted by weakness in U.S. dollar
(Repeats to additional subscribers with no change to text)
By Kevin Plumberg
HONG KONG, Oct 30 (Reuters) - Asian stocks rose for a third
day on Thursday, boosted by the prospect of more
growth-supportive policies globally following interest rate
cuts by China and the United States that pushed up commodity
prices and knocked down the yen.
The Federal Reserve cut its benchmark rate to 1 percent on
Wednesday to the lowest since June 2004, to soften the blow of
a potentially deep recession. [] Norway and China
had cuts of their own and pressure mounted on the Bank of Japan
for a rate reduction after it meets on Friday.
For now, the avalanche of government measures taken to
increase bank liquidity, including $120 billion of currency
swap lines opened between the Fed and four emerging markets,
have prompted investors to take on risks.
This has boosted currencies such as the Australian dollar
and the South Korean won. Credit availability and risk taking
are essential to the functioning of the financial system.
"The bounce in risk appetite is set to continue into the
Asian session especially in light of the action from the Fed
both in terms of interest rates and in terms of liquidity
provision," Calyon currency strategists in Hong Kong said in a
note.
"Although we remain hesitant to believe that this is
anything more than a short-lived improvement in sentiment
especially given the likely worsening in economic news over
coming months, we would not buck the trend in the short term."
Asia-Pacific stocks traded outside Japan climbed for a
third day, up 7.2 percent, according to an MSCI index
<.MIAPJ0000PUS>. The last time the index rose for three
straight days was in mid June, reflecting the relentless
selling that has battered shares. The index is still down 55
percent so far this year.
Investors have snapped up global equities this week on the
first sign of improving sentiment, with valuations in some
markets at extreme levels. For example, the ratio of prices to
book value on Japan's Nikkei share average <> dropped on
Monday to 0.87, the lowest in more than a decade.
On Tuesday, the Nikkei rose 3.9 percent, recovering from a
26-year low hit on Tuesday. The weaker yen emboldened investors
to buy shares of exporters such as Honda Motor Co <7267.T> and
Canon Inc <7751.T>.
South Korea's KOSPI <> surged 8.4 percent, leading the
region higher, after the government established a $30 billion
currency swap line with the U.S. central bank. The measure
would likely relieve pressure on banks to refinance foreign
debt.
Hong Kong's Hang Seng index <> gained 6.1 percent, with
shares sensitive to fluctuations in commodity prices among the
top gainers. CNOOC <0883.HK>, China's biggest offshore oil
refiner, leapt 12.2 percent.
U.S. stocks fell on Wednesday as a big rally faltered in
the last minutes of trading on worry about the weakening
corporate profit picture after a news report raised questions
about General Electric's <GE.N> earnings outlook. []
YEN FALLS, WON SURGES
The yen weakened on the combination of increasing risk
appetite as well as expectations of the first rate cut by the
Bank of Japan since the financial crisis broke out more than a
year ago.
The euro jumped 2.9 percent against the yen to 129.86 yen
<EURJPY=R>. The euro hit a 6-1/2-year low below 114 yen last
Friday.
The U.S. dollar rose 1.6 percent to 99.00 yen, <JPY=>
staying well above a 13-year trough of 90.87 yen hit on trading
platform EBS late last week.
Analysts at Morgan Stanley however said they still expected
the yen to strengthen further.
"Our view is that yen strength owes more to de-risking and
repatriation flows that do not seem to have run their course,
yet," they said in a note.
"Japan-based investors appear to have been caught offsides
by the recent yen gains, and this may result in additional
hedging flows and further retrenchment from foreign assets as
investment losses increase."
In addition to foreign exchange swaps established between
the Fed and central banks in Brazil, Mexico, Singapore and
South Korea, the International Monetary Fund in a separate
action set up a short-term fund for countries with good track
records but in need of capital.
The two measures improved sentiment on emerging markets and
helped to propel the Korean won 10 percent higher against the
U.S. dollar.
Raw materials prices rose in the wake of the U.S. dollar's
sharp decline overnight. U.S. crude futures were up more than
$2.00 above $69.50 barrel <CLc1>, having risen about $8 from
the lowest level since May 2007.
