Asia: Markets mostly down but Tokyo soars on weak yen

[HONG KONG] Tokyo stocks resumed a rally on Wednesday as the yen fell against the dollar on US interest rate talk but most other Asian markets struggled as investors were spooked by the prospects of higher borrowing costs in the world's top economy.

Dollar demand has intensified since Federal Reserve boss Janet Yellen on Friday hinted at a possible hike as data point to continued economic improvement.

Figures showing US consumer confidence at its highest level in almost a year provided further evidence of a brighter outlook.

On Tuesday vice chairman Stanley Fischer told Bloomberg TV that any movement in rates was dependent on data, adding that "employment is very close to full employment".

Investors' focus is now on Friday's key jobs creation report, which could be pivotal in the Fed's decision-making ahead of next month's policy meeting, although there are some reservations about whether a move will be made then.

"The Fed's more upbeat mood and a summer of record highs on Wall Street have boosted the US dollar's yield appeal," Sean Callow, a senior currency strategist at Westpac Banking Corp in Sydney, told Bloomberg News.

"Payrolls is certainly very important, though there are strong indications that seasonal factors will ensure the headline reading will not provide the Fed with the slam dunk it needs for a September hike."

In early trade the dollar bought 103.02 yen, unchanged from New York but well up from Tuesday's 102.42 yen in Asia and last week's levels below 100 yen.

Dealers were also soft on the yen after another weak indicator on Japan's factory output pushed expectations the nation's central bank will widen its monetary easing programme to kickstart the economy.

The weakness in the yen once again helped Japan's exporters and the Nikkei ended the morning 0.8 per cent higher.

However, while Hong Kong was marginally higher, Sydney sank one percent and Seoul was 0.3 per cent down while Singapore, Wellington and Taipei each fell 0.1 per cent. Shanghai lost 0.2 per cent.

The stronger dollar added fresh downward pressure on oil prices, with West Texas Intermediate down 0.2 per cent at US$46.27 and Brent 0.1 per cent off at US$48.32.

Both contracts tumbled on Tuesday after the oil minister at key producer Iran reportedly said the country planned to ramp up output.

The comments come as the Opec producer cartel - of which Iran is a member - and Russia prepare for a meeting next month aimed at addressing a global supply glut that has hammered prices.

AFP