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Hang Seng at 3-year high, top performing major market

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Short sellers pare bets against NZD

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Fed and tariff deadline loom

By Tom Westbrook

SINGAPORE, March 18 (Reuters) - Hong Kong shares rose to

three-year highs and led Asian markets higher on Tuesday, as

investors turn positive on the outlook for the world's

second-biggest economy and cheered recent data and promises to

further support consumption.

The Hang Seng was up 2% in morning trade and its 23%

year-to-date gain is easily the largest of any major market.

Short sellers rushed to cover bets against the New Zealand

dollar, which is sensitive to China's consumer via food

exports, sending it to a three-month high of $0.5827.

The China-sensitive Australian dollar hit a

one-month high just shy of $0.64 and China's yuan

hovered near its strongest levels of the year so far.

On Monday the OECD forecast U.S. President Donald Trump's

higher tariffs will drag down growth in Canada, Mexico and the

U.S. while driving up inflation.

Yet China has been an unlikely winner of Trump's burst of

tariffs and cuts to government spending in his first two months

in office, as fears of a U.S. slowdown turn investors abroad.

"Momentum and sentiment (is) shifting now as well in a

positive way," said Nick Ferres, chief investment officer at

Vantage Point Asset Management in Singapore.

On Sunday China announced childcare subsidies and a "special

action plan" to boost domestic consumption and on Monday data

showed retail sales growth quickened in January-February. Trump

said Chinese President Xi Jinping may visit the U.S. in the

not-too-distant future, further raising expectations that some

sort of breakthrough deal could reduce tariffs.

The Hong Kong dollar is parked in the strong half

of its trading band against the dollar and Hong Kong interbank

rates have been falling lately, pointing to the weight

of money pouring into the financial hub.

Mainland shares made more modest gains, while MSCI's

broadest index of Asia-Pacific stocks rose 1% with markets in

Seoul, Sydney and Taipei also higher.

Japan's Nikkei bounced 1.5%, putting it on course

for its sharpest rise in three weeks.

Overnight on Wall Street stocks stabilised but the mood

remains fragile leading into April, when Trump's threatened

reciprocal tariffs are set to take effect.

Softer-than-expected retail sales and factory activity

figures kept downward pressure on the U.S. dollar and on U.S.

yields, opening further gains for gold.

Gold marked a record high at $3,005 an ounce in the

Asia morning. The euro was firm above $1.09 and

sterling, which touched a four-month top overnight,

traded a whisker short of $1.30.

Ten-year Treasury yields were steady at 4.293%.

Ahead in the day a German economic survey is due, though

markets' focus is on the U.S. Federal Reserve, which concludes a

two-day meeting on Wednesday, and the outcome of a phone call

between Trump and Russian President Vladimir Putin.

Trump said he would talk to Putin about ending the Ukraine

war - a prospect which has pushed down on European gas prices

and sent the euro rallying in recent weeks.