[HONG KONG] Japanese stocks rallied on a weaker yen but other Asian markets retreated Monday after Federal Reserve chief Janet Yellen hinted at a US interest rate hike by the end of the year.
In a much-anticipated speech Friday Yellen said a pick-up in the world's top economy and an improvement in the jobs market meant "the case for an increase in the federal funds rate has strengthened in recent months".
While there is speculation rates could rise as early as next month, most experts had said that is unlikely and that December or February would be safer bets.
Yellen did not give a timeframe during her speech at the annual Jackson Hole symposium of global central bankers, but Fed vice chairman Stanley Fischer later said September was a possibility.
"After a week of guessing, Dr Yellen left little to the imagination when she stated that the case of a Fed rate hike had strengthened, but remains very much data dependent," Stephen Innes, senior trader, Oanda, said in a note.
"Given the proximity of the granddaddy of all Fed data, the non-farm payroll, it is without question that this week's print will take on more importance than usual."
The labour department is due to release jobs figures on Friday.
Expectations for a rise sent the dollar soaring in New York, and it extended its gains on Monday.
It bought 102.11 yen, up from 101.77 yen in US trade and well up from the 100.45 yen in Asia earlier Friday, while the euro was down more than a US cent at US$1.1190.
Higher-yielding, or riskier, currencies were also hit, with South Korea's won losing 0.8 per cent and the Indonesian rupiah off 0.5 per cent, while Malaysia's ringgit shed 0.7 per cent.
The weaker yen boosted Japan's exporters, sending the Nikkei stock index surging 2.2 per cent by the break.
But while the the greenback and Japanese traders took heart from the comments, other regional markets turned negative on the prospect of borrowing costs rising.
Shares in Hong Kong, where monetary policy is linked to that of the United States, fell 0.4 per cent, while Sydney shed 1.1 per cent and Shanghai shed 0.1 per cent. Seoul and Singapore were each down 0.5 per cent.
The stronger dollar also weighed on oil prices as it makes the commodity more expensive for those using weaker currencies.
West Texas Intermediate fell 1.2 per cent to US$47.05 and Brent shed 1.1 per cent to US$49.37.
Analysts said prices were also being weighed by worries over the outcome of a meeting next month between Opec and Russia aimed at addressing a global supply glut.