* Asian equities underpinned by strong inflows
* Dollar edges up, but still near lows; jumps vs yen
* Eyes on central bank moves as BOJ, RBA meet this week
* Oil steady at 2-mo high at $81; gold near record high
By Vikram S.Subhedar
HONG KONG, Oct 4 (Reuters) - Asian stocks shot to a
two-year high on Monday, boosted by interest in emerging
markets, while the dollar edged up after last week's selloff
though speculation the Federal Reserve will add to money supply
was still rife.
The dollar remained close to an eight-month low against a
basket of major currencies <.DXY>, with expectations increasing
the Fed will resort to a second round of bond purchases before
the year is over to support the U.S. economy. []
By contrast, Chinese manufacturing activity has held up
surprisingly well, keeping investors confident about the
region's prospects and pushing up the MSCI index of Asian
stocks outside Japan <.MIAPJ0000PUS> to the highest level since
June 2008.
"Continued foreign buying, amid the U.S. dollar's recent
weakness and an increasing preference for emerging market
stocks, has lifted the market to a new high," said Lee Jin-woo,
a market analyst at Mirae Asset Securities in Seoul.
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
For a graphic on market developments:
http://link.reuters.com/rem45n
For a comparison of global markets this year,
http://graphics.thomsonreuters.com/F/09/GLB_MKTQE.html
For Asian markets' performance, see:
http://graphics.thomsonreuters.com/F/09/AS_MARKETS.html
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Strong foreign portfolio flows into the region have lifted
Asian currencies, putting pressure on regional central banks to
step up intervention to limit the inflow of speculative "hot
money" and to support their export-oriented economies.
In South Korea, foreign investors were buyers of a net 141
billion won ($124.8 million) worth of stocks, poised to pick up
shares for a 14th straight session, the longest buying streak
since April.
Japan's Nikkei <> reversed earlier losses and was up
0.3 percent as the yen weakened against the dollar and ahead of
a Bank of Japan policy decision on Tuesday.
The dollar surged in a short-covering rally against the
yen, which retreated against other currencies as investors
unwound some long yen positions ahead of the BOJ meeting.
CENTRAL BANKS ON TAP THIS WEEK
Former BOJ Deputy Governor Toshiro Muto said on Friday the
central bank may ease policy as inaction would run the risk of
spurring further yen gains, given the prospects for easing by
the U.S. Federal Reserve. []
Traders are not expecting the BOJ to make a substantial
change to policy but may hold off on big bets on the yen ahead
of central bank meetings in Britain and the euro zone on
Thursday, as well as the September U.S. payrolls report on
Friday.
"Nervous trade will likely continue this week, even after
tomorrow's event, as U.S. jobs data is also set to be released
later in the week," said Hiroaki Kuramochi, chief equity
marketing officer at Tokai Tokyo Securities.
The MSCI index of Asia Pacific shares outside Japan, which
has risen for six consecutive weeks, was up 1.1 percent with a
2.3 percent gain in the energy sector leading the pack on the
back of firm crude prices.
Hong Kong's Hang Seng index <> led regional exchanges,
rising 1.4 percent, with oil-related stocks such as CNOOC Ltd
<0883.HK> providing the most support to the market.
Petrochina Co. <0857.HK>, the world's second-most valuable
oil and gas producer, was up 3.7 percent in Hong Kong.
U.S. crude futures <CLc1> were steady near a two-month high
at $81 a barrel, having risen $5 in the past week on the
dollar's weakness and as a strong revival in Chinese
manufacturing by a mid-year lull appeared to soothe fears of a
new downturn in the global economy. []
The dollar looked vulnerable against a basket of
currencies, hovering near Friday's eight-month low, but had
edged up 0.2 percent against a basket of currencies in Asian
trade<.DXY>.
"It's still a dollar-negative situation but short-term
probably the market has priced a lot in," said Masafumi
Yamamoto, chief FX strategist Japan at Barclays Capital.
Asian currencies, such as the South Korean won and
Taiwanese dollar, climbed against the dollar, despite an
estimated $18.8 billion spent by regional central banks last
week to keep their currencies weak, according to estimates from
traders compiled by IFR Markets.
The potential of significant amount of cheap money being
added to the financial system via the Federal Reserve continued
to support gold prices.
The precious metal was up 0.2 percent to $1,317.55 an
ounce, after hitting a fresh record of $1,320.80 on Friday on
sustained dollar weakness.
(Additional reporting by Charlotte Cooper in TOKYO and
Catherine Tan in SINGAPORE; Editing by Ron Popeski)
