By Saikat Chatterjee
HONG KONG (Reuters) - Asian stocks rose for the first time in three days on Tuesday while sterling and other currencies advanced as investors scooped up beaten down assets after Britain's vote to exit the European Union stunned financial markets.
European markets looked set to follow Asian stocks higher, according to financial bookmakers, and U.S. stock futures rose 0.8 percent, suggesting a stronger opening on Wall Street after a brutal two-day slide.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.1 percent but the tiny gain belied an impressive turnaround which saw the Japanese stocks rally more than 3 percent from the day's lows, pulling other Asian markets higher. The Nikkei was up 0.6 percent by early afternoon.
But in a sign that investors remained extremely nervous, trading volumes were light and price action was choppy across markets.
"Short-covering in the currency market and U.S. futures market is limiting selling," said Yutaka Miura, senior technical analyst at Mizuho Securities. "But overall sentiment remains fragile."
"Friday's Brexit jump scare has faded, but markets are still worried" about its possible effect on global demand, SLW brokerage trader João Paulo de Gracia Corrêa said.
Policymakers from Japan to China vowed to protect their economies and markets from the destabilising impact of Brexit.
"It's hard to avoid short-term volatility in China's capital markets, but we won't allow roller-coaster rides and drastic changes in the capital markets," Premier Li Keqiang said at the World Economic Forum (WEF) in the city of Tianjin.
In currency markets, sterling was changing hands at $1.3291, after falling to a three-decade low of $1.3122 on Monday, its weakest since 1985.
Against the yen, sterling rose 1 percent to 135.54, not far from Friday's 3-1/2 year low of 133.18. The euro stood at 82.93 pence after scaling a two-year peak of 83.79 pence on Monday.
The euro edged down slightly to $1.1060, not far above Friday's three-month low of $1.0912 after the British vote.
"In the near term, risk aversion and market uncertainty makes the euro less attractive to investors," Kathy Lien, managing director of foreign exchange strategy at BK Asset Management, wrote in a note to clients.
"In the long run, Brexit also raises questions about the Eurozone's viability because if major countries like Britain start dropping out the EU, nationalism could drive smaller Eurozone nations to exit out of the euro," she said, adding that she expects the euro to "make another run" for the $1.0900 level.
Early signs of a cautious return in demand for riskier assets were evident in the high-yielding Aussie and the New Zealand dollar, which helped put a floor under other emerging market currencies in Asia.
Anticipating yet another round of global policy easing by major central banks, government bond yields pushed deeper into negative territory. Yields on ten-year and 20-year Japanese debt plunged to fresh record lows.
Gold, one of the rare outliers in global financial markets in the last few days, came in for a bit of profit taking with the precious metal down 0.7 percent. Silver fell 0.3 percent.
Crude oil prices regained some of their overnight losses after tumbling nearly 3 percent on Monday.
U.S. crude added 1.7 percent to $47.11 a barrel after shedding 2.8 percent on Monday, while Brent rose 1.6 percent to $47.89 after skidding 2.6 percent and touching seven-week lows overnight.
(Additional reporting by Lisa Twaronite in TOKYO; Editing by Shri Navaratnam and Kim Coghill)
