* US data add to optimism over sustainable economic
recovery
* Dollar at 7-month high vs yen, Aussie up on rate rise
* Stock markets creep higher as Dow reaches for 11,000
* Asia ex-Japan stocks up 0.5 pct but Nikkei falls
* Yuan offshore forwards price in slightly more
appreciation
By Vidya Ranganathan
SINGAPORE, April 6 (Reuters) - Asian stock markets rose to
three-month highs on Tuesday, extending a two-week rally
fuelled by strong U.S. economic data and a seeming thaw in
U.S.-China tensions over the yuan.
The dollar held near 7-month highs against the yen,
supported by a surge in U.S. Treasury yields, while the
Australian dollar gained after the central bank raised interest
rates by a quarter point, stoking expectations it will do the
same next month.
European stocks <> were also set to rise as much as
0.8 percent after a long Eastern holiday weekend, following
Asian and U.S. markets.
The MSCI Asia ex-Japan index <.MIAPJ0000PUS> rose half a
percent on signs that a global recovery was gathering strength,
with data on Monday showing the U.S. services sector expanded
at its fastest pace in four years in March [].
The services report and stronger-than-expected pending home
sales pushed the Dow Jones Industrial average <> up 0.4
percent, just shy of the psychologically important 11,000 point
mark. []
Taiwan's stock market <> initially rose 1 percent and
then paring gains, while Jakarta's <> hit a fresh record
high before also falling back.
But some of Asia's stock markets struggled to maintain
momentum after having hit successive highs in the past week.
Japan's Nikkei average <> fell 0.5 percent as traders
took profits after successive days of 18-month highs, while
South Korea's KOSPI <> ended little changed despite
Samsung Electronics' <005930.KS> forecast of a record quarterly
profit.
"We have some short-term technicals suggesting the market
is a bit overstretched, but any corrections will be more along
the lines of a small breather and there's no change in the
overall trend to buy," said Hiroichi Nishi, general manager at
the equity division of Nikko Cordial Securities.
Still, the sluggishness in South Korean stocks even after
Samsung rose to a fresh high suggested investors may have
already priced in upbeat earnings estimates, which could limit
further gains in coming months.
The tech-heavy KOSPI has risen 10 percent in the past two
months. Samsung surged nearly 20 percent in recent weeks but
closed down 0.1 percent on Tuesday. []
At the same time, besides a gradual easing of concerns
about European sovereign debt over the past few weeks,
investors' appetite for riskier assets was boosted at the
weekend by an announcement that the U.S. Treasury had delayed
by at least three months its semi-annual report on currency
policy.
That report, due on April 15, could have named China a
currency manipulator, sparking trade frictions and more
defiance from the Chinese authorities on the virtually pegged
yuan <CNY=CFXS>.
The yuan firmed further in offshore forward markets on
Tuesday, taking the implied appreciation in a year's time to
just above 3 percent, as markets in Shanghai opened after a
long weekend and roused speculation of a currency revaluation,
albeit a small one.
"China is more or less getting ready for a move in the
currency. We think that move will happen in the next 4 to 5
weeks," said Mirza Baig, currency strategist with Deutsche
Bank.
"The kind of move might not be what the market expects. We
think China might be moving towards allowing two-way
fluctuations in the dollar/china exchange, instead of a purely
one-way appreciation."
CURRENCIES
The dollar gained 0.35 percent against a basket of major
currencies <.DXY> on Tuesday. It fell against the yen <JPY=> to
near 94 while the euro slipped to $1.3420. []
The Aussie dollar rallied around 45 pips to $0.9220 after
the Reserve Bank of Australia delivered its fifth rate rise
since October, particularly against the New Zealand dollar and
euro.
Asian currencies rose on Monday and continued their gains
on Tuesday, expecting that China will unleash the yuan from its
peg within the three-month window given by the U.S.
authorities.
Malaysia's ringgit <MYR=>, regarded as one of the best
proxies for betting on the yuan, rose 0.4 percent to 3.2170 per
dollar.
Analysts expect currencies and stocks in resource-rich
Asian economies will benefit if and when a higher yuan makes it
cheaper for China to import more.
Non-deliverable dollar/yuan forwards <CNYNDFOR=> have
fallen across the curve this week, with the one-year NDF
hitting levels close to 6.62 yuan per dollar, its lowest since
January.
Deutsche's Baig said he liked to be long Asian currencies
generally because growth in the region was more robust than in
the West.
"As Beijing adjusts their policy, we may see more
appreciation in other Asian currencies as well," he said.
U.S. Treasuries rose in Asia with dealers covering short
positions in bond futures following a slide on Monday, when
benchmark yields touched 4 percent for the first time in 10
months as the upbeat U.S. data pared safe-haven demand for
bonds. []
Oil <CLc1> slipped 10 cents to $86.53 per barrel as the
dollar strengthened, pulling back from an 18-month high near
$87 a day earlier on hopes U.S. economic growth is
accelerating.
Oil prices rose more than 8 percent in the five sessions to
Monday, their steepest 5-day winning streak this year and
pushing up shares of energy companies worldwide. (Editing by
Kim Coghill) ((vidya.ranganathan@thomsonreuters.com;
+65-68703090; Reuters Messaging:
vidya.ranganathan.reuters.com@reuters.net))
