Asia Stocks Gain as Dollar Holds Losses on U.S. Economic Outlook

December 26, 2011, 2:13 AM EST By Shiyin Chen

Dec. 26 (Bloomberg) -- Asian stocks rose to the highest level in almost two weeks, while the dollar maintained losses against higher-yielding peers amid speculation the U.S. economy will continue to recover.

The MSCI Asia Pacific Index advanced 0.2 percent as of 3:05 p.m. in Tokyo, set for the highest close since Dec. 13. Financial markets from Hong Kong to Singapore, the U.K. and the U.S. are closed for holidays today. The dollar was little changed at $1.3056 against the euro. The yuan surged to a 17- year high on speculation policy makers will tolerate appreciation to capital stem outflows.

Reports tomorrow may show home prices in 20 U.S. cities probably declined at a slower pace and consumer confidence improved to a five-month high. Data last week showed durable goods orders jumped in November by the most in four months, while sales of new homes increased to a seven-month high.

“The U.S. economy is improving more than expected,” said Hideyuki Ishiguro, assistant manager at the investment strategy department at Okasan Securities Co. in Tokyo. “Pessimism is easing among American consumers due to a recovery in the job market and some stability in the stock market.”

About five shares advanced for every four that declined on MSCI’s Asia Pacific Index. The gauge has dropped 17 percent this year, compared with a 12 percent retreat in the Stoxx Europe 600 Index and a 0.6 percent increase in the Standard & Poor’s 500 Index of U.S. shares.

Japan’s Nikkei 225 Stock Average added 1 percent, the BSE India Sensitive Index jumped 1.1 percent, while South Korea’s Kospi Index lost 0.6 percent. Canon Inc. climbed 1.3 percent after the Nikkei newspaper reported that the camera maker may pay a 120 yen ($1.54) dividend this year.

U.S. Economy

The S&P 500 added 0.9 percent on Dec. 23, erasing its losses for this year, after Commerce Department data showed orders for goods meant to last at least three months rose 3.8 percent in November. A separate report showed purchases of single-family properties increased 1.6 percent to a 315,000 annual pace, while consumer spending rose less than forecast in November as wages declined for the first time in three months.

Property values probably dropped 3.2 percent in October from the same month in 2010, the smallest year-over-year decrease since January, according to the median forecast of 20 economists before a report from S&P/Case-Shiller. Consumer confidence may have climbed to a five-month high of 58.6 in December from 56 last month, a separate survey showed before tomorrow’s report from the New York-based Conference Board.

‘Resilient’ Economy

“Excessive pessimism has receded at the end of the year, and what we’re seeing is some unwinding of safe-haven buying of currencies like the dollar and yen,” said Kengo Suzuki, manager of the foreign-bond department in Tokyo at Mizuho Securities Co., a unit of Japan’s third-biggest listed bank by market value. “The U.S. economy is resilient.”

The Dollar Index, which tracks the U.S. currency against those of six trading partners, was little changed after sliding last week. The Australian dollar rose 0.1 percent to $1.0165.

The yuan strengthened 0.12 percent to 6.3290 per dollar as the central bank set the reference rate 0.07 percent higher at 6.3167 per dollar. A depreciation of the yuan may fuel outflows of capital, Yi Xianrong, a researcher at the Institute of Finance and Banking that is affiliated to the Chinese Academy of Social Sciences, wrote in a commentary in the China Daily.

Japan and China will promote direct trading of yen and yuan without using dollars and will encourage the development of a market for companies involved in the exchanges, the Japanese government said a meeting between Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao in Beijing yesterday.

--With assistance from Mariko Ishikawa, Monami Yui, Yoshiaki Nohara and Toshiro Hasegawa in Tokyo. Editors: Richard Dobson, Rocky Swift

To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net

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