HONG KONG, Dec 7: Asian markets were mostly higher on Tuesday as dealers brushed off a report that China will hike interest rates soon, but Japanese shares sank as the yen surged against the dollar.

The dollar hit a three-week low against the Japanese unit following comments by US Federal Reserve head Ben Bernanke that the bank could pump more money into the economy.

Shanghai ended the day 0.65 per cent, or 18.68 points, higher at 2,875.86.

The index bounced back from heavy losses earlier in the session caused by a report in the state-run China Securities Journal saying that the central bank may raise rates as early as the weekend, just ahead of the release of inflation data on Monday.

A hike would be the second in two months by China as it tries to combat rising inflation and the report comes after the politburo on Friday said it would shift its monetary policy stance from “relatively loose” to “prudent”.

Beijing raised rates for the first time in three years in October as prices surged past the government's ceiling of three per cent.

Hong Kong closed up 0.82 per cent, or 190.46 points, at 23,428.15 and Sydney gained 0.81 per cent, or 38.2 points, to 4,726.8. Seoul added 0.45 per cent, or 8.88 points, to 1,962.52.However, a strengthening yen sent Tokyo down 0.26 per cent, or 26.13 points, to 10,141.10 after Bernanke's comments.

Markets got a weak cue from New York, where the Dow edged down 0.05 per cent on eurozone concerns as well as Bernanke's comments.—AFP