HONG KONG, Sep 14 Asian stocks rose on Friday boosted by financial shares after a Wall St

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HONG KONG, Sep 14 (Reuters) Asian stocks rose on Friday boosted by financial shares after a Wall Street analyst said stocks of U.S. investment banks were undervalued, but caution ahead of U.S. retail sales data kept the dollar under pressure.

After setting a record high of $80.20 a barrel, U.S. crude took a bit of a breather, slipping 31 cents to $79.78 in early Asian trade, while spot gold extended its pullback to $706 an ounce, from a 16-month peak set on Tuesday.

Gains in equity markets though are expected to be capped ahead of the weekend and next Tuesday's Federal Reserve policy-setting meeting, where a cut of at least 25 basis points to the benchmark fed funds rate is widely expected.

''Until the Federal Reserve meeting, we're not likely to move much. Everybody is expecting a rate cut, though there's uncertainty about how much they'll cut rates,'' said Kim Hak-kyun, an analyst at Korea Investment and Securities.

MSCI's measure of Asia Pacific stocks excluding Japan climbed 0.4 percent by 0054 GMT, extending Thursday's 0.5 percent gain, while Tokyo's Nikkei average put on 0.8 percent.

The MSCI index looked set to close higher for a fourth straight week and has risen more than 20 percent from a five-month trough plumbed on Aug. 17. It was just 4 percent below the July 24 life high.

Investors bought shares in Macquarie Bank, sending the stock up 3 percent after the top Australian investment bank said it expected record first-half profit and had only modest credit exposure to hedge fund industry.

Gains in their U.S. peers also helped push investment banks in Asia higher. Nomura Holdings put on 0.7 percent and Daiwa Securities Group climbed 0.5 percent.

MSCI's index of financial shares in the Asia Pacific region gained 0.5 percent.

News that Countrywide Financial Corp, the largest U.S.

mortgage lender, had lined up $12 billion of financing to help weather the housing slowdown also helped ease credit worries.

Financial stocks were badly hit during the market sell-off between late July to mid-August sparked by fears of a global credit shortage stemming from the U.S. subprime-mortgage crisis.

Also in favour were Japanese exporters such as Canon Inc and Tokyo Motor, which were further helped by a weaker yen.

''Exporters and high-tech shares are likely to rise given the dollar's gain against they yen,'' said Tsuyoshi Segawa, an equity strategist at Shinko Securities.

YEN, DOLLAR SOFT The yen struggled to gain traction after losing ground overnight, hurt by economic and political uncertainty in Japan following the shock resignation of Prime Minister Shinzo Abe earlier in the week.

The dollar held near a record low versus the euro and just above a 15-year low against a basket of currencies as investors awaited U.S. retail sales data for fresh clues to the health of the world's biggest economy.

Despite weakness against other currencies, the dollar traded at 115.03 yen was well above this week's low near 112.60 yen.

The euro fetched 159.50 yen after hitting a one-month peak near 160.50 yen on Thursday, and was also well off the week's low at about 155.15 yen.

Against the dollar, the euro stood at US$1.3871, not far off a record high of US$1.3927 set in the previous session.

''If the U.S. is the only country in the world that will slow meaningfully, the dollar deserves to head lower,'' said Stephen Jen, global head of currency strategy at Morgan Stanley, in a note to clients.

''But valuations should limit the size of the damage to the dollar, and we expect the dollar to rebound with the economy, when that happens.'' Strength in stocks dampened demand for safe-have government bonds, pushing the yield on the benchmark 10-year Japanese government bonds up 3-{ basis points to 1.560 percent.

Reuters SZ VP0730

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