Asia markets dip, Tokyo soars as US rate talk hits yen

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 rise 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".

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 for a Fed rate hike had strengthened, but remains very much data-dependent," Stephen Innes, senior trader at 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 labor department is due to release jobs figures on Friday.

Expectations for a rate rise sent the dollar soaring in New York, and it extended its gains on Monday.

It bought 102.30 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 cent at $1.1192.

- Boost for exporters -

Higher-yielding, or riskier, currencies were also hit, with South Korea's won losing one percent and the Indonesian rupiah off 0.5 percent, while Malaysia's ringgit shed 0.7 percent.

"Much will depend on the US non-farm payroll data," said Richard Jerram, chief economist at Bank of Singapore.

"A soft number would be no surprise after two unusually strong months, which would put paid to the chance of a move in September. We think that a move in December is more likely, followed by two or three hikes next year."

The weaker yen boosted Japan's exporters, sending the Nikkei stock index 2.3 percent higher at the close.

But while the greenback and Japanese traders took heart from the comments, other regional markets turned negative on the prospect of a rise in borrowing costs.

Shares in Hong Kong, where monetary policy is linked to that of the United States, fell 0.4 percent, while Sydney closed 0.8 percent lower and Seoul eased 0.3 percent. Singapore was 0.8 percent lower in late trade, while Shanghai finished marginally lower.

In early European trade Frankfurt lost 0.2 percent and Paris was 0.4 percent off. London was closed for a holiday.

The stronger dollar also weighed on oil prices as it makes the commodity more expensive for those using weaker currencies.

West Texas Intermediate fell 1.5 percent to $46.92 and Brent shed 1.4 percent to $49.24.

Analysts said prices were also depressed by worries over the outcome of a meeting next month between OPEC and Russia aimed at addressing a global supply glut.

- Key figures at 0800 GMT -

Tokyo - Nikkei 225: UP 2.3 percent at 16,737.49 (close)

Shanghai - Composite: DOWN 0.28 points at 3,070.03 (close)

Hong Kong - Hang Seng: DOWN 0.4 percent at 22,821.34 (close)

Euro/dollar: DOWN at $1.1192 from $1.1195

Dollar/yen: UP at 102.30 yen from 101.77 yen Friday

Pound/dollar: DOWN at $1.3107 from $1.3135

New York - DOW: DOWN 0.3 percent at 18,395.40

London - FTSE 100: Closed for public holiday