Jan. 13 (Bloomberg) -- Asian stocks advanced, lifting the regional index to a 2 1/2-year high, while the dollar rose for the first time in four days on speculation the U.S. recovery is strengthening and that Europe’s debt crisis will be contained. The MSCI Asia Pacific Index added 0.8 percent to 139.42 as of 3 p.m. in Tokyo, set for the highest close since June 20, 2008. Standard & Poor’s 500 Index futures retreated 0.1 percent. The dollar rose against 13 of its 16 most-active peers. Corn and soybeans climbed to the highest level in more than two years and oil advanced for a fourth day amid a decline in U.S. inventories. Stocks are gaining before the release of reports tomorrow that may show U.S. retail sales increased for a sixth month and industrial production expanded. Spain and Italy are poised to test investor sentiment with debt sales today, after borrowing costs fell for Portugal at yesterday’s auction of 10-year bonds amid a pledge by German Chancellor Angela Merkel to take whatever steps are necessary to stem the crisis. “The Europe situation appears contained,” said Khiem Do, the Hong Kong-based head of Asian multi-assets strategy at Baring Asset Management (Asia) Ltd., which oversees about $13 billion. “The equity rally looks sustainable as the world economy continues to grow, despite monetary tightening in some emerging-market economies.” About two stocks climbed for each that declined on MSCI’s Asian index. Benchmark indexes in all markets open for trading rallied, except for India and South Korea. Australia’s S&P/ASX 200 Index jumped 1.5 percent, its sharpest daily increase since Dec. 2, as BHP Billiton Ltd. and other mining companies advanced. Hynix, Unimicron Hynix Semiconductor Inc. climbed 3.4 percent after Mirae Asset Securities Co. raised its share-price estimate on the world’s second-largest computer-memory chipmaker on expectations it will benefit from a potential industry restructuring. Unimicron Technology Corp., a Taoyuan-based printed-circuit board maker, jumped 5.1 percent in Taipei after the company was raised to “overweight” from “neutral” at HSBC Holdings Plc. Infosys Technologies Ltd., India’s second-largest software exporter, dropped 4 percent after posting third-quarter profit that missed analysts’ estimates. The Dollar Index, which tracks the currency against those of six trading partners, increased 0.2 percent to 80.197. Sales at U.S. retailers rose 0.8 percent in December, the same amount as in November, according to a Bloomberg News survey of economists before the Commerce Department’s report. Output at factories, mines and utilities grew 0.5 percent last month, after a 0.4 percent in the prior month, a separate survey showed before the Federal Reserve’s report. Inflation Expectations The difference between two- and 30-year Treasury rates rose to a record as traders demanded higher yields before the government sells $13 billion of the long maturity today. Treasury Inflation Protected Securities showed expectations for price increases were near an eight-month high on speculation the Federal Reserve’s injection of $600 billion into the U.S. economy will lead to faster growth and higher costs. The Fed will buy $7 billion to $9 billion of Treasuries today due from July 2016 to December 2017 as part of the plan, according to its website. The euro fetched 108.80 yen from 109, after earlier reaching 109.15 today, the strongest level since Jan. 6. It yesterday reached $1.3145, the highest since Jan. 6, after Merkel said that Germany will “stand by” the currency. Spain will auction as much as 3 billion euros ($3.9 billion) of five-year bonds, while Italy will sell 6 billion euros of securities maturing in 2026 and 2015. Portugal sold 599 million euros of bonds due in 2020 at a yield of 6.716 percent yesterday, compared with 6.806 percent at the previous auction Nov. 10. ‘Relief’ for Europe “The relief is fairly clear that we’ve seen some declines in yields now,” William de Vijlder, the chief investment officer at BNP Paribas Investment Partners, said in a Bloomberg Television interview from Singapore. “It buys time for the governments of Portugal and a number of other countries to take the right budgetary measures to get this under control.” Accelerating inflation prompted the Bank of Korea Governor Kim Choong Soo to raise the seven-day repurchase rate by a quarter of a percentage point to 2.75 percent, a decision predicted by four of 10 economists surveyed by Bloomberg News. The South Korean currency gained 0.5 percent to 1,114.18 per dollar. Government bonds fell, with the yield on the 4 percent note due September 2015 rising two basis points to 4.28 percent, according to data from Korea Stock Exchange. Attention on Inflation “There’s a lot of attention recently on inflation and Asian central banks are under pressure to raise rates,” said Ho Woei Chen, an economist at United Overseas Bank Ltd. in Singapore. “European sentiment has also improved.” The yuan climbed 0.1 percent to 6.5970 per dollar, approaching a 17-year high, after the U.S. made renewed calls for China to let its currency rise, ahead of President Hu Jintao’s visit to Washington next week. Treasury Secretary Timothy F. Geithner said yesterday China needs to strengthen the “substantially undervalued” yuan as it puts other countries at a competitive disadvantage. Hu is due to meet with President Barack Obama on Jan. 19. “It’s interesting that China decided to strengthen its currency despite overt pressure from Geithner yesterday,” said Dariusz Kowalczyk, an economist at Credit Agricole CIB in Hong Kong. “Apparently, China decided that it’s very important Hu has the arguments to fend off Congressional critics of its policies. We expect further appreciation in the coming days.” Capital Inflows Capital inflows, a driving force of the recovery in emerging countries, now pose risks to global growth as they can trigger abrupt currency fluctuations that may do “lasting damage” to some nations, the World Bank said in a Jan. 12 statement. The Washington-based institution left its 2011 growth forecast for the world’s economy unchanged at 3.3 percent. Australia’s dollar trimmed yesterday’s gains after government data showed the nation added fewer jobs than economists forecast in December, while the unemployment rate declined. The currency, known as the Aussie, traded at 99.48 cents from 99.66 in New York, after earlier declining to 99.23 U.S. cents. Corn climbed as much as 1.7 percent to $6.42 a bushel, the highest level since July 2008, before trading at $6.3775 a bushel. Soybeans gained as much as 1.1 percent to $14.30 a bushel and traded at $14.17 a bushel. Rubber rose as much as 1.2 percent to 454.4 yen per kilogram, a record high. Crude oil rose as much as 0.3 percent to $92.16 a barrel on the New York Mercantile Exchange. Futures increased 0.8 percent yesterday to $91.86, a 27-month high, after an Energy Department report showed stockpiles dropped 2.15 million barrels to 333.1 million last week, the lowest level since February. --With assistance from Rishaad Salamat in Hong Kong, Saeromi Shin in Seoul, and James Poole, Ron Harui, Wes Goodman and Patricia Lui and Sonja Cheung in Beijing. Editors: Rocky Swift, Jonathan Annells To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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