Most Asia markets rise on weak US data, yen hits Tokyo

Hong Kong - Asian markets mostly rose on Wednesday but Tokyo tumbled on a strong yen as a shock slump the US service sector wiped out the chances of an interest rate hike this month.

The weak reading out of Washington also lent support to high-yielding currencies, with the South Korean won sitting around one-year highs.

The Institute for Supply Management said its US non-manufacturing purchasing managers' index had dived to its lowest level in more than six years. The reading follows figures showing a slowdown in jobs creation and factory activity.

Stephen Innes, senior trader at OANDA, said in a note: "The significance of the ISM services print cannot go understated as services account for more than 70% of the value of US GDP and will likely create jitters" over third-quarter economic growth.

The prospect of continued ultra-low borrowing costs in the world's top economy was cheered on trading floors, sending the Nasdaq in New York to a record high while the Dow also rallied as investors returned from the Labour Day public holiday.

The upbeat mood filtered through to Asia, with Hong Kong up 0.1% - building on a four-day rally - while Shanghai put on 0.2% and Seoul 0.3%. Singapore, Taipei and Wellington also posted healthy gains.

Sydney edged up 0.1% after data showed the Australian economy expanded 3.3% on-year in April-June, broadly in line with forecasts and marking 25 years of unbroken growth.

However, Tokyo sank 0.7% by the break as the yen extended gains against the dollar following the US PMI reading.

'Quixotic calls'

The dollar bought ¥101.30 in Tokyo, down from ¥101.99 in New York and well off the ¥103.61 in Asia earlier on Tuesday.

After rallying last week on speculation of a rate hike this month, the data out of Washington has doused any of those hopes, analysts said, while a rise this year could now be in question.

"The trifecta of terrible ISM manufacturing and non-manufacturing PMIs and weaker-than-expected non-farm payrolls have left the quixotic calls for a September rate hike dead in the water," Angus Nicholson, a market analyst in Melbourne at IG, said in an e-mail to clients.

"This is no longer a September story - for even a December rate hike to occur both ... PMIs are going to have to stage quite a rapid recovery in the next month or so."

The dollar was down one percent against the won, while Australia's dollar added 0.4%, Indonesia's rupiah climbed 0.3% and the Turkish lira was up 0.6%. There were also sharp gains in the Malaysian ringgit, and the Singapore and New Zealand dollars.

Oil prices enjoyed some boost from the weaker dollar, which makes the commodity cheaper for holders of other units.

West Texas Intermediate was up 0.2% at $44.91 and Brent added 0.3% to $47.39, although gains were limited as traders grow sceptical that a meeting between Russia and OPEC this month will result in any deal to limit output.