Rising optimism pushes Asia stocks to three year highs

TOKYO (REUTERS) - Asia stocks nudged three-year highs on Tuesday on rising optimism over global growth prospects and a record-run on Wall Street, helping lift Treasury yields and the dollar.

Monetary easing by the European Central Bank last week has brightened the mood for risky assets globally, with an upbeat U.S. nonfarm payrolls report released Friday giving further impetus.

On Wall Street overnight the S&P 500 ended at a fourth straight record closing high and the Dow at its third. There was muted market reaction to Chinese inflation data released earlier in the day, as it remained well within the governments' comfort zone.

China's consumer prices rose 2.5 percent in May from a year earlier while producer prices fell 1.4 percent. "No surprises again from May inflation data.

Producer prices stabilised whereas consumer inflation continues to be driven by food prices. The core measure is unchanged, pointing to muted inflationary pressure," said Andy Ji, senior Asian currency strategist at Commonwealth Bank of Australia in Singapore.

"The set of numbers has no implication on monetary or exchange rate policies, in our view."

Recent global manufacturing data have largely highlighted improving economic conditions, with China's exports also showing a bounce in May. MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.2 percent after touching 493.19, its highest since July 2011.

Australian shares rose 0.4 percent. Tokyo's Nikkei bucked the trend and lost 0.4 percent as profit taking kicked in after it advanced to a three-month high on Monday.

"The week ahead is likely to be a quiet one for emerging market asset prices as the focus shifts to the World Cup,"strategists at Brown Brothers Harriman wrote in a note to clients.

"Still, central banks continue to occupy the centre stage after Mexico's surprise cut and Brazil's extension of its forex intervention program last week. Many are looking for the Korean central bank to step up its forex interventions as USD/KRW breaks below the key 1020 level," they said.

The South Korean won strengthened to below 1020 to hit a near six-year peak against the dollar, supported by persistent stock inflows, although participants were wary of official intervention.

The dollar continued to benefit from rising U.S. Treasury yields.

The dollar index, which measures the greenback's strength against a basket of key currencies, held steady after rising 0.2 percent on Monday. The dollar stood little changed at 102.36 yen. The euro was also flat at $1.3588 after shedding nearly 0.4 percent on Monday.

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