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* Investors greet steady Fed with cautious optimism
* Shares of banks, property firms up after Fed decision
* Euro rises to record high vs yen ahead of ECB meeting
By Kevin Plumberg
HONG KONG, June 26 (Reuters) - Asian stocks edged up on
Thursday from a three-month low after the Federal Reserve kept
rates steady while the euro hit a record high against the yen
on the prospects for a euro zone rate rise.
Stocks were buoyed by Fed comments downplaying the
potential for a deeper U.S. economic slowdown, but uncertainty
about inflation kept gains in check and fuelled a rally in the
euro against the yen on expectations that the European Central
Bank would raise rates next week.
The U.S. central bank signalled on Wednesday it was in no
hurry to raise rates any time soon, supporting government bond
prices that had been sold off sharply on expectations central
banks around the world would tackle price pressures
aggressively.
Still, given that oil prices remain above $130 a barrel and
persistent rises in food prices, investors were cautious about
the outlook for the region.
"We've probably seen the worst, but how much better it's
going to get in the short term is questionable," said Tony
Russell, senior equities adviser at ABN AMRO Morgans in Sydney.
Japan's Nikkei share average <> rose 0.4 percent, on
track to break a string of five sessions of losses.
Hong Kong's Hang Seng index rose 0.9 percent <>, with
China Mobile <0941.HK> providing the biggest lift.
Local property firms also boosted the index, in a relief
rally after the Fed's stance eased concerns about sudden
increase in borrowing costs.
The MSCI index of stocks in the Asia-Pacific region
<.MIAPJ0000PUS> outside of Japan rose 1.1 percent, while the
pan-Asia index gained 0.6 percent <.MIAS00000PUS>. Both indexes
hit the lowest since March on Wednesday.
Stocks in Australia led Asia higher, gaining 1.5 percent
<>. The country's four largest retail banks, which have
been beaten up in recent sessions led the index higher, with
Commonwealth Bank of Australia <CBA.AX> providing the biggest
lift.
OIL STEADIES AFTER FALL
Japanese government bond yields, which move inversely to
prices, dipped as investors scaled back expectations for Bank
of Japan interest rate rises in the wake of the Fed's
less-hawkist-than-expected policy decision.
The benchmark 10-year yield <JP10YTN=JBTC> dipped half a
basis point to 1.670 percent, holding near a one-month low of
1.665 percent struck the previous day.
The two-year yield <JP2YTN=JBTC> dropped 1.5 basis points
at 0.835 percent.
The euro hit a record high against the yen as investors
looked at the potential for a widening gap between ECB and
Japanese interest rates.
The ECB has maintained a hawkish stance against inflation,
raising expectations it could increase interest rates next
week. Bank of Japan rates are seen on hold for a while.
The euro climbed above 169.20 yen <EURJPY=>, its highest
level against the yen since the single European currency was
launched in 1999.
The U.S. dollar also gained against the yen, up 0.2 percent
at 108 yen <JPY=>. The euro was largely unchanged against the
dollar at $1.5663 <EUR=>.
Oil steadied above $134 a barrel on Thursday after dropping
more than $2 on Wednesday as U.S. government data showed a
surprise increase in domestic crude stocks last week.
"The surprise rise in U.S. crude stocks has pointed to a
weakening demand outlook in the U.S.," said Gerard Burg, a
commodities analyst at National Australia Bank in Melbourne.
"The market will focus on the U.S. economic data due later
today to get a clearer picture of the economy and its impact on
oil demand."
