By Chikako Mogi
TOKYO (Reuters) - Asian stocks and the euro steadied on Tuesday, but sentiment remained fragile on concerns that efforts to contain the euro zone debt crisis were faltering and tougher rules to strengthen banks' capital would further undermine their profits.
Sentiment in Asia was already risk-averse, after the death of North Korea leader Kim Jong-il raised fears of regional instability and prompted investors to pull money out of riskier assets and into the safe-haven dollar on Monday.
MSCI's broadest index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> inched up 0.1 percent on Tuesday, after sliding as much as 2.9 percent the day before, while South Korea's benchmark index also opened 0.8 percent higher, after plunging as much as 5 percent on news of Kim's death on Monday. <.KS>
Tokyo's Nikkei share average <.N225> opened up 0.3 percent, after hitting a new three-week low on Monday. <.T>
Investors were likely to maintain cautious stance, with pre-holiday trading thinning to make price swings sharper than usual, but a further heavy selling was also seen unlikely.
"We couldn't see much bargain-hunting yesterday even at current cheap levels," said Kenichi Hirano, operating officer at Tachibana Securities.
European finance ministers failed on Monday to boost resources at the International Monetary Fund by the targeted 200 billion euros, agreeing to raise 150 billion euros, leaving doubts about whether the scheme would work with London, Washington and Germany's Bundesbank unenthusiastic.
With worries that the region's scheduled permanent bailout fund is insufficient to handle the debt problems, the increase in the IMF resources is seen as a vital part of Europe's steps to prevent the debt crisis from spinning out of control.
U.S. stocks fell on Monday, as Bank of America
Dollar funding strains intensified, with the costs for euro zone banks to borrow dollars rising. The benchmark London interbank offered rate on three-month dollars rose for a seventh straight session to 0.56695 percent on Monday, the highest level since July 2009.
The euro hovered around $1.3000 in early Asian trade on Tuesday, little changed from late in New York and off Monday's low of around $1.2983. It hit an 11-month low of $1.2944 last week.
European policymakers made some progress in pursuing fiscal consolidation in Europe at a key summit meeting earlier in the month, but their failure to nail down a convincing commitment for a crucial bailout program has prompted rating agencies to warn of credit rating downgrades of several euro zone countries.
Commodities also steadied after coming under selling pressures on Monday. U.S. crude futures inched up 0.4 percent on Tuesday while gold was steady at $1,593.44, after falling to a low near $1,582 an ounce on Monday.
Asian credit markets firmed as other markets stabilized, with spreads on the iTraxx Asia ex-Japan investment grade index narrowing by a couple of basis points early in Asia on Tuesday.
(Additional reporting by Hideyuki Sano in Tokyo; Editing by Alex Richardson)
