Asian stocks at two-year high

Asian stocks shot to a two-year high, helped by emerging market funds, while the dollar rebounded after last week's selloff on speculation the Federal Reserve will boost money supply.

The dollar, however, was not far from an eight-month low against a basket of major currencies, with expectations increasing that the Fed would resort to a second round of bond purchases.

The MSCI index of Asian stocks outside Japan rose 0.5 per cent to its highest level since June 2008.

In its latest note, EPFR said global emerging market equity funds ended September with their 18th consecutive week of net inflows. So far this year, inflows into the group are now at 87 per cent of last year's record $44.2 billion.

Asia ex-Japan equity funds took in over $1.5 billion for the second week running, said EPFR, on the back of robust Chinese economic growth and on expectations that weaker US data will translate into a new round of stimulus measures.

Japan's Nikkei reversed earlier losses and was up 0.8 per cent as the yen weakened against the dollar.

A strong revival in Chinese manufacturing by a mid-year lull appeared to soothe fears of a new downturn in the global economy.

Purchasing managers' indexes (PMI) for the United States and Europe showed activity cooling in September but the indexes remained well above the 50 mark that divides growth from contraction.

The dollar looked vulnerable against a basket of currencies, hovering near Friday's eight month low, but had edged up 0.2 per cent against a basket of currencies in Asian trade.

The euro had a quick run above $1.3800 to its strongest levels since mid-March in very early Asian trade but then retreated as sell orders from Middle Eastern banks kicked in, one trader at a Canadian bank said.