Asian shares mixed as China tumbles on rate hike report

The dollar slipped as the market reacted to comments by US Federal Reserve head Ben Bernanke that the central bank could pump more money into the economy, while the euro continued to be pressured by European debt woes.

Shanghai fell 0.53 per cent after the state-run China Securities Journal said Tuesday that the central bank may raise interest rates around this weekend, ahead of the release of inflation data on Monday.

A hike would be the second in two months by China as it tries to combat rising inflation. On Friday the politburo said it would shift its monetary policy stance from "relatively loose" to "prudent".

Beijing raised rates for the first time in three years in October as prices surged past the government's ceiling of three per cent.

However, Hideaki Inoue, senior dealer at Mitsubishi UFJ Trust and Banking, told Dow Jones Newswires: "This is moving the market in the absence of other major news, but to a large extent I think any such hike has already been priced in."

Tokyo fell 0.26 per cent, or 26.13 points, to close at 10,141.10 as exporters were hurt by a stronger yen after Bernanke's comments.

The Fed chief told CBS television Sunday that "it's certainly possible" that the bank might inject into markets more than the $600 billion decided on last month.

"It depends on the efficacy of the programme. It depends on inflation. And finally it depends on how the economy looks," he added in the interview recorded last week.

With the prospect of markets being flooded with more dollars, the greenback tumbled to a three-week low against the yen in Asian trade, hitting 82.30 before climbing back to 82.63, compared with 82.67 in New York Monday.

"There was a widespread view for a shift towards the weaker yen, but that storyline collapsed following the (weak) US jobs data," on Friday, said Yutaka Yoshii, general manager at Mito Securities.

Markets got a weak cue from New York, where the Dow edged down 0.05 per cent on eurozone concerns as well as Bernanke's comments.

But Hong Kong gained 0.57 per cent by the break and Singapore was flat.

Sydney jumped 0.81 per cent, or 38.2 points, to 4,726.8 after the central bank held interest rates, citing the strong Australian dollar and European debt problems, and suggested another hike would not come until next year.

The European debt woes returned as Eurogroup head Jean-Claude Juncker said Monday after a Brussels meeting that EU finance chiefs saw no need for "immediate action" to bolster a trillion-dollar EU-IMF fund for countries in trouble.

His comments come amid fears that the debt crisis that last month claimed Ireland as its latest victim threatens to spread, notably to Portugal and Spain.

Juncker added that ministers concluded that the "priority now" was for states to accelerate budgetary consolidation.

Dutch Finance Minister Jan Kees de Jager insisted: "It's easy to speculate on more rescue money and eurobonds, but I want to talk prevention now instead."

The euro was changing hands at $1.3338, up from $1.3304 in New York late Monday. It stood at 109.98 yen from 109.96 yen.

On oil markets, New York's main contract, light sweet crude for January delivery, slid 24 cents to 89.14 dollars a barrel in the afternoon and Brent North Sea crude for January fell 43 cents to $91.02.

"The whole market is reacting on the downside because the Chinese central bank may be raising interest rates this weekend," said Serene Lim, oil and gas analyst for ANZ bank in Singapore.

Gold opened at 1,421.00-1,422.00 US dollars an ounce in Hong Kong, up from Monday's close of 1,416.00-1,417.00.

In other markets:

-- Seoul rose 0.45 per cent, or 8.88 points, to 1,962.52.

-- Taipei ended flat, edging up 2.16 points to 8,704.39.

Hon Hai rose 0.44 per cent to 113.5 Taiwan dollars while UMC fell 0.91 per cent to 16.25.

-- Manila shed 0.60 per cent, or 25.20 points, to 4,197.92.

Aboitiz Power fell 4.0 per cent to 33.60 pesos, while Metropolitan Bank dropped 1.82 per cent to 72.85 pesos. Top-traded Alliance Global plunged 5.06 percent to 12 pesos.

-- Wellington closed 0.34 per cent, or 11.34 points, lower at 3,281.86.

Contact Energy fell 0.64 per cent to 6.17 New Zealand dollars, Telecom slipped 1.4 per cent to 2.15 and Air New Zealand rose 0.7 per cent to 1.42.