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SINGAPORE, Apr 7 (Reuters) Asian share markets turned lower on Friday after a strong week, while the dollar gained against the euro after the European Central Bank downplayed the likelihood of a May interest rate rise.

The dollar could gain further if U.S. employment figures for March later in the day add to expectations of U.S. rate rises.

Gold edged closer towards $600 an ounce, touching a quarter-century peak of $598 in early deals, while oil was trading above $67.50 a barrel after it hit a two-month high of $68.20 on Thursday.

Tokyo's benchmark Nikkei average ended morning trade down 0.28 percent at 17,440.22, while MSCI's index of non-Japan Asian shares was down 0.2 percent at 0200 GMT.

''It is only natural that people want to take some profits, they have been making a lot on money lately,'' said Yoku Ihara, manager of the investment information department at Retela Crea Securities. The Nikkei reached its highest level since July 2000 this week.

The prospect of higher U.S interest rates -- bolstered by an unexpected drop in U.S. jobless claims last week -- and higher oil prices weighed on Asian exporter stocks.

The Nikkei eased as declines in Honda Motor Co. Ltd. and other car makers that had hit lifetime highs in previous sessions outweighed rises in Kyocera Corp. and other technology firms, which were boosted by a five-year closing high on the Nasdaq Composite Index Still, the Nasdaq ended up just 0.06 while the Dow Jones industrial average ended down 0.21 percent.

Hong Kong's Hang Seng was flat at the open after hitting a 5-{ year high on Thursday, and then edged down in opening deals.

South Korea's main index was down 0.2 percent at 0200 GMT, with losers including LG.Philips LCD Co. Ltd., the world's number-two flat-panel maker, and LG Electronics Inc., the world's top maker of air conditioners.

The central bank held interest rates steady on Friday, as widely expected, but the Korean won still rose to its highest against the dollar in 8-{ years.

Taiwan stocks were down 0.4 percent as investors took profit on shares such as Asustek Computer Inc. after U.S.

stocks put in a mixed performance.

''The strong Nasdaq rally pushed domestic tech stocks up in the past week and now there is some ongoing consolidation,'' said Shinkong Investment Trust manager Kevin Lin.

Australian shares paused for breath on Friday, after a string of record peaks this week, but the world's top explosives maker Orica was boosted by a strong debut for rival Dyno Nobel, which opened at a 17 percent premium to its IPO price.

EURO RETREAT The euro extended its retreat from a seven-month high against the dollar after the European Central Bank chief smothered market expectations for an interest rate rise in May.

After the ECB kept its key overnight rate at 2.5 percent as expected, Jean-Claude Trichet said the central bank did not share the same view as the market, which had girded for a clear signal that the central bank would tighten policy again next month.

''The market was positioned exactly against what he ended up saying,'' said Luke Waddington, head of forex trading at Royal Bank of Scotland in Tokyo.

In early Asian trade, the euro slipped to under $1.22, down from a peak of $1.2333 hit before Trichet's remarks.

The dollar was flat to slightly stronger against the yen up 0.1 percent at 117.85 at 0200 GMT from late New York.

With the market's gaze firmly trained on rate differentials, the U.S. jobs figures could offer clues about the Fed's way forward. Economists polled by Reuters expect a gain of 190,000 jobs in March, and an steady unemployment rate of 4.8 percent.

Expectations that Japan could start raising rates as soon as mid-year saw the yield on five-year government bonds jump five points to 1.4 percent, its highest since the maturity was introduced in February 2000.

''The rise in European and U.S. bond yields is helping to pull JGB yields higher, particularly in shorter maturities,'' said Takafumi Yamawaki, fixed income strategist at Morgan Stanley.

REUTERS CS DS1213