SINGAPORE, Feb 2 (Bloomberg): Asian stocks climbed from a two-month low after a report showed US manufacturing expanded more than estimated and as commodity prices advanced. The Australian dollar dropped after the central bank unexpectedly left interest rates unchanged. The MSCI Asia Pacific Index gained one per cent to 117.41 as of 5:10 p.m. in Tokyo following a 1.4-per cent increase in the Standard & Poor's 500 Index yesterday in New York. S&P 500 futures fell 0.2 per cent. The Dow Jones Stoxx 600 dropped 0.1 per cent to 248.07 at 8:10 am in London. The dollar traded near the highest level in almost seven months against the euro amid concern Greece will struggle to reduce its deficit. US manufacturing expanded in January at the fastest pace since August 2004, boosting confidence that the economy is recovering from the worst recession since World War II. Australia's central bank kept its benchmark interest rate unchanged, ending a streak of three consecutive increases, to gauge the strength of an economic recovery. "Markets overall were as oversold as they had been for some months and a bounce was expected," Prasad Patkar, who helps manage $1.5 billion at Platypus Asset Management in Sydney. "The world is a markedly better place, in an economic sense, than it was 12 months ago so there is good reason to believe the market will stay bid." Japan's Nikkei 225 Stock Average advanced 1.6 per cent to 10,371.09. Australia's S&P/ASX 200 Index climbed 1.8 per cent. Canon Inc, which gets 28 per cent of revenue from the Americas, added 2.7 per cent in Tokyo. BHP Billiton Ltd., the world's largest mining company, rose 3.2 per cent in Sydney. Toyota Motor Corp gained 4.5 per cent after saying it will resume some production operations that were halted following an accelerator pedal problem in 2.3 million vehicles. The Institute for Supply Management's factory index rose to 58.4, exceeding the highest estimate in a survey of economists. Readings greater than 50 signal expansion. Incomes climbed 0.4 per cent, also more than expected, according to the Commerce Department in Washington. The dollar strengthened to as much as $1.3933 versus the euro in Tokyo. The greenback reached $1.3853 yesterday in New York, the strongest level since July 8. The greenback fetched 90.74 yen from the 90.61 yen close in New York. The Japanese currency reversed its loss on the day against the euro, trading at 125.88 per euro from 126.24 yesterday when it hit 124.43 yen, the highest level since April 28. The European Union will issue a review of Greece's budget- cutting plans tomorrow. The nation's deficit program is "very ambitious and this will need to be implemented under difficult circumstances," EU Economic and Monetary Affairs Commissioner Joaquin Almunia said in an interview yesterday in Brussels. "European policy makers seem to be worried that Greece's problems may spread," said Yuji Saito, director of the foreign exchange department at Calyon Bank in Tokyo. "This is putting a brake on any gains in the euro." The so-called Aussie fell against all of its 16 most-traded counterparts after Reserve Bank Governor Glenn Stevens left the overnight cash rate target at 3.75 per cent in Sydney. All 20 economists surveyed forecast a quarter-point boost. Futures traders estimated a 74-per cent chance of an increase. The Australian currency weakened as much as 1.5 per cent to 87.85 US cents from 89.14 cents in New York. The decision suggests Stevens and his board may keep borrowing costs unchanged in coming months to gauge the economic impact of previous increases. Business confidence, particularly among retailing companies, fell in December to the lowest level in six months, a report showed today. "The decision will bring the currency back to a degree, but the Reserve Bank hasn't gone away," said Stephen Roberts, a senior economist at Nomura Australia Ltd. in Sydney. "This is purely a pause, certainly not a sign that they're finished."

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