* Asia stocks hit 2-mth high, but rally starts to lose
steam
* S&P surges 7 pct on toxic debt plan, housing data
* Yen tumbles as carry trades make comeback
* Dollar down, China touts SDRs as reserve alternative
By Eric Burroughs
HONG KONG, March 24 (Reuters) - Asia stocks rose to their
best level in two months on Tuesday and higher-yielding
currencies jumped against the yen as Washington's plan to
relieve banks of toxic debt spurred investors to pick up
riskier assets.
The gains in major Asian equity markets followed a 7
percent surge in the U.S. S&P 500 <.SPX> after a surprise rise
in home sales, spurring hopes that a recovery is taking hold in
the battered housing market at the heart of the global credit
crisis. []
Financial shares extended their rally after investors
cheered the U.S. Treasury's plan to free banks of up to $1
trillion in troubled mortgage securities and other loans, part
of the array of measures designed to jump start lending and the
economy.
Oil prices dipped 15 cents to $53.65 a barrel <CLc1> after
reaching a four-month high the previous day. []
The revival in risk-taking boosted currencies such as the
Australian and New Zealand dollars against the yen as carry
trades -- borrowing in low-yielding currencies and buying
higher-yielding ones -- showed signs of making a comeback.
[]
As financial markets have stabilised, gauges of volatility
have dropped and made carry trades seem more appealing.
"The long-awaited U.S. programme is finally out, and that
is significant enough to bring some stability to the market,"
said Minoru Shioiri, chief manager of currency trading at
Mitsubishi UFJ Securities in Tokyo. "That means the market is
likely to have a bias for a weaker yen."
The MSCI index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> climbed 1.4 percent, taking gains to 28 percent
from the five-year low hit last November.
Asian currencies edged up and have recovered as foreign
investors have slowly started shifting money back to the
region.
"Good news for the U.S. financial sector is good news for
South Korean banks as well, as it will ease difficulties
getting foreign currency, and foreign capital may feel
encouraged to enter domestic markets," said Ku Yong-uk, an
analyst at Daewoo Securities in Seoul.
Japan's Nikkei share average <> was up 1.5 percent and
struck a two-month high.
But the rebound in stocks showed some signs of running out
of steam.
The Nikkei's 20 percent rise from its lows hit earlier this
month meets the traditional definition of a bear market rally,
and some technical indicators suggested the benchmark index has
reached overbought levels.
S&P futures <SPc1> were down 0.6 percent and pointing to a
weaker start on Wall Street.
BONDS AND DOLLAR DOWN
Safe-haven government bonds succumbed to the global stock
rally but have mostly held up as central banks have taken
extraordinary measure of buying large chunks of debt outright
to keep a lid on yields.
Such purchases, which in some cases have meant outright
monetisation of rising government budget deficits, serve as one
means of helping economic growth with short-term interest rates
already near zero.
Ten-year Japanese government bond yields were flat at 1.260
percent <JP10YTN=JBTC>, as some investors took advantage of an
initial back-up in yields to buy paper as they eye the start of
Japan's new business year in April.
The dollar slid back towards the two-month low hit against
a basket of major currencies last week when investors seized on
the Federal Reserve's decision to buy large amounts of
Treasuries as a sign of the ongoing erosion of the world's
reserve currency.
As the debate about the dollar's role intensifies, Chinese
central bank governor Zhou Xiachuan said on Monday that the
dollar could be replaced as the world's main reserve unit by
the IMF's Special Drawing Right. []
The comments suggest that big holders of dollar reserves,
such as China, are mulling alternatives in considering a big
shift in the global financial architecture that has ruled the
post-World War Two period.
The dollar index -- a gauge of its performance against six
major currencies -- dipped 0.2 percent to 83.320 <.DXY>. Among
higher-yielding currencies, the Aussie <AUD=> was up 0.8
percent and hit a 4-
