GLOBAL MARKETS-Dollar weak, stocks up as Fed easing view grows

Published 10/11/2010, 03:07 AM
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* Dollar weak, hits 15-year low vs. yen in early trade

* Asian stocks, metals rally as cheap money trade continues

* Weak U.S. jobs data adds fuel to Fed easing speculation

* IMF, G7 offers no fix for currency market tensions

* Corn jumps most since 1972 on U.S. supply worries (Updates with European open, adds comment)

By Vikram S.Subhedar

HONG KONG, Oct 11 (Reuters) - The dollar slid to a 15-year low against the yen and Asian stocks rose on Monday as U.S. jobs data boosted the chances of easier U.S. monetary policy and IMF and G7 meetings produced little to ease global currency tension.

Major European stocks opened slightly higher, mirroring gains in Asia and on Wall Street with the FTSEEurofirst 300 0.2 percent in early trade to 1,072.60.

Finance leaders meeting over the weekend in Washington produced no quick fix for global economic imbalances, suggesting the cheap money trade of selling dollars to buy emerging market assets and commodities looks set to continue for now.

That was further spurred by weaker-than-expected jobs data in the United States on Friday that raised the chances the Federal Reserve would inject fresh funds into the economy as soon as its Nov. 2-3 meeting.

"At the end of the day we are going to have QE2 one way or the other and we are going to to have currency rebalancing. The question is how to play this now," said Geoff Howie, sales and markets strategist at MF Global in Singapore, referring to a second round of quantative easing.

One group that stands to benefit is commodities that stand to gain on the back of rapid growth in developing Asian economies as well as persistent dollar weakness.

Metals rallied with London copper hitting a fresh 27-month peak while Shanghai zinc futures rose 5 percent to its upside limit of 18.875 yuan a tonne.

The dollar weakened broadly against a basket of currencies and against the yen fell as far as 81.37 yen, its lowest level in 15 years. It later recovered to 81.99.

Although Japan is closed for a national holiday on Monday, the dollar's slide put markets on alert for potential intervention by the Bank of Japan, especially since the G7 and the IMF didn't produce any overt criticism of Tokyo's yen selling.

But with the yen already trading above the levels at which the BOJ intervened last month and the dollar's persistent weakness, any impact from intervention may be short-lived.

"Corporate Japan is just going to have to wake up and deal with a yen at or around 80. No amount of intervention is going to make much difference," said Howie.

The MSCI Asia ex-Japan stock index rose 0.6 percent on expectations that a flood of investment funds into emerging markets would continue.

Hong Kong shares hit a more than 2-year peak, breaking out of a trading range that has held since November 2009 and leading a broad rally in Asian markets.

CORN RISES MOST SINCE 1972

Chicago corn jumped 8.5 percent for its biggest gain in 28 years, boosted by a U.S. government forecast that supplies in the world's top exporter would shrink to their lowest in 14 years. Chicago Board of Trade December corn futures surged as much as 45 cents to hit a high of $5.73-¼ a bushel, the highest since Sept. 24, 2008, and trading limit up for the second straight day.

The Australian dollar pulled back slightly after coming close to testing a 28-year high of $0.9918 against the U.S. dollar, while shares rose to five-month highs as the country emerges as a clear winner in the investment shift to higher yields and commodities.

Precious metals extended their gains with spot silver hitting a 30-year high and gold rising 0.4 percent to edge back towards a record high reached on Thursday of $1,364.60 an ounce.

Emerging powers won a battle on Saturday for heightened IMF scrutiny of rich countries' economic policies as world financial leaders sought to defuse mounting tension over currencies. Investors will get earnings reports this week from bellwether U.S. corporations including Google, and JPMorgan Chase & Co, although the short-term direction of stocks is likely to be dominated by the possibility of more cheap money flowing in the from the Fed. (Additional reporting by Koh Gui Qing in SYDNEY and Jungyoun Park in SEOUL; Editing by Robert Birsel)

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