* Aussie March bill futures in biggest rise since June
* Korean cross-currency swap up as RBA weighs on risk-seeking
By Vidya Ranganathan
SINGAPORE, Feb 2 (Reuters) - Aussie bill futures jumped after the Reserve Bank of Australia surprised markets by opting not to raise rates on Tuesday, leading to a broader pullback in riskier assets that also caused Korean won cross-currency swaps to rise.
The Australian dollar shed more than a cent against the U.S. dollar after the RBA decision to keep the policy rate at 3.75 percent stunned markets that had braced more or less for a 25 bps rise in rates.
Aussie March bill futures jumped 21 points to 95.82, the biggest single-day jump since June last year, as markets scaled back expectations for rate rises during the year.
While most stock markets in Asia were lifted by the strength of U.S. manufacturing data, the surprise RBA decision to skip a rate rise coupled with lingering concerns over China's policy tightening had investors reassessing their exposure to risk.
In Korea for instance, interest rate swaps fell after the RBA decision, with the one-year IRS dipping 6 basis points to 3.37 percent.
The cross-currency basis in won, the difference between the interest rate and cross currency swaps (CCS) narrowed as dollar/won swaps rose, despite a drop in risk-seeking trades.
One-year dollar-won cross-currency swaps were 15 bps higher than levels on Monday, at 1.25 percent. The basis, an approximate gauge of returns for foreigners swapping dollars to invest in Korean bonds, was narrower at 213 bps compared with 225 in the previous session.
"Tightening moves of China and India will slow down a global recovery," said Kong Dong-rak, a fixed-income analyst at Taurus Investment & Securities in Seoul. "If that expectation forced Australia to stop raising rates, risk appetite will weaken more."
Hwang Tae-yeon, a fixed-income analyst at Tong Yang Securities, said the won basis could widen again if there was a bigger rush for safer assets, if for instance concerns about European debt and deficits flared up. That could lead to more outflows from Korea, driving the cross-currency swap lower and leading to more paying in interest rate swaps.
"It is difficult to be as optimistic as last year as China's recent move has prompted worries about slowing a global economic recovery and U.S. restrictions on banks reduced global liquidity," Hwang said.
In Australian markets meanwhile, wrong-footed traders noted the RBA's bias to tighten policy remained intact and it was merely taking time to assess the impact of the past three rate rises.
TD Securities strategist Annette Beacher said this had merely led her to reverse her call for a rate rise this month followed by a pause in March.
"We still target a cash rate of 4.5 percent by June, and 5.25 percent by end-2010," she wrote to clients.
Yet, a Credit Suisse gauge of market expectations of rate rises within the next year showed markets now only expect 73 bps of policy tightening, compared with 92 on Monday.
(Editing by Neil Fullick)