By Lisa Twaronite and Wayne Cole
TOKYO/SYDNEY (Reuters) - Asian markets took cheer on Tuesday after Wall Street rang up more records and upbeat U.S. spending data burnished the outlook for the global economy, with Japan's Nikkei hitting a 2013 high after Tokyo markets opened following a holiday.
Tokyo's Nikkei ended up 0.1 percent, posting its highest closing level in six years for the third session in a row. Earlier, it topped the 16,000-mark driven by buying from long-only investors after Wall Street marched upwards. Japan's benchmark was up more than 50 percent this year, on track for its best annual rise since 1972.
"Hedge funds are pretty quiet. A lot of them have closed their books for the year, so if hedge funds are quiet there is really no shorting going around in the market at the moment," a trader at a European bank in Tokyo said.
The Australian market added 0.7 percent in a holiday-shortened session, while MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.4 percent.
Investors also kept a wary eye on China's benchmark money market rate, after rates in the interbank market spiked to their highest level since June in recent days due partly to seasonal factors that increase banks' demand for cash near the end of each quarter.
The People's Bank of China injected funds through normal channels for the first time in three weeks, but traders warned that conditions remained tense.
"The relief is quite palpable after the cash injection by the PBOC today," said Jackson Wong, Tanrich Securities vice-president for equity sales. "But everything is now very short term, we are at quarter-end and funding needs are high."
The injection helped Hong Kong recover from lows hit this week. Hong Kong's Hang Seng Index rose 1.1 percent after ending on Friday at its lowest since mid-November. But the Shanghai Composite Index erased earlier gains and turned negative in volatile trading after closing last Friday at its lowest since August.
Hong Kong markets closed at noon on Tuesday for Christmas and will resume trading on Friday. Mainland China's markets are open through the week, as are markets in Japan.
U.S. stocks rose on Monday after data showed consumer spending climbed to a five-month high last month, and the latest consumer sentiment reading showed improvement. Despite the signs of strength, inflation remains benign, with a price index for consumer spending unchanged for a second straight month.
The Dow Jones industrial average rose 0.45 percent, while the S&P 500 gained 0.53 percent and the Nasdaq 1.08 percent.
Apple Inc's distribution deal with China Mobile lifted the technology sector, and Apple itself added 3.83 percent for the day.
The U.S. economic reports prompted some analysts to upgrade their forecasts for economic growth for the quarter, which in turn follows upward revisions to the third quarter.
Investors chose to focus on the strength in consumption rather than the benign inflation, and priced in slightly more risk of an earlier hike in interest rates by the U.S. Federal Reserve.
Fed fund futures were fully pricing in a move to 0.5 percent in September of 2015, compared to this time last week, when futures indicated a November hike.
Government borrowing costs have also been rising even for shorter-dated debt. Yields on two-year Treasury notes were around 39 basis points, compared with a trough of 26 basis points last month.
Rising yields supported the dollar, but it still struggled against its European counterpart. Many analysts believe the relative outperformance of the U.S. economy will benefit the dollar over time, but progress is proving to be glacial.
On Tuesday, the euro was buying $1.3681, down slightly but still holding above last week's low of $1.3623. For the year to date, the euro is still up nearly 4 percent against the dollar.
Both currencies have fared much better on the yen, easily the weakest of the major currencies this year as the Bank of Japan remains committed to its massive stimulus campaign.
The dollar rose 0.1 percent to 104.19 yen after hitting a five-year high of 104.63 yen on Friday, while the euro was nearly flat on the day at 142.53 yen, also not far from a 5-year high touched last week.
Among Asian currencies, the Thai baht fell to a low of 32.80 versus the dollar, its weakest level since March 2010. Thailand's political turmoil grew as anti-government protesters gathered on Sunday to demand Prime Minister Yingluck Shinawatra resign.
In commodity markets, gold dipped below the $1,200 level to $1,198.71 an ounce and was heading for its biggest annual loss in three decades. It has shed nearly 30 percent so far this year and is threatening the April 2010 bottom under $1,050.
U.S. crude fell 0.2 percent to $98.70 a barrel, off a two-month high of $99.40. Benchmark Brent crude was flat at $111.56 per barrel, with prices underpinned by a conflict in South Sudan, which threatened its oil output at a time when production cuts in Libya are already curbing global supply.
(Additional reporting by Dominic Lau in Tokyo and Clement Tan in Hong Kong; Editing by Jacqueline Wong)