Asian share markets climb, dollar steadies

By Staff
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SINGAPORE, Dec 6 (Reuters) The dollar steadied against the yen on Wednesday as robust US services sector data eased concern about the health of the world's largest economy and added to the upward momentum of Asian share markets.

Taiwan stocks rose to a fresh 6-year closing high as U.S.

gains lifted electronics companies such as TSMC and other tech exporters, while Japan's Nikkei average climbed to its highest close in a month.

Oil prices held above $62 a barrel ahead of U.S. inventory data and possible supply cuts by producer group OPEC, and gold fell sharply after the dollar rebounded in New York.

Financial bookmakers in London expected the FTSE 100 index to open unchanged after closing up in the previous session.

''The U.S. service sector will prop up sentiment for firms dependent on sales to the country, though the currency remains a concern,'' said Kim Yong-gak, a market strategist at Hyundai Securities.

A weaker dollar is generally negative for the exporters that drive many Asian economies because it makes their goods less competitive in the United States, a key market.

The dollar hovered around 114.66 yen and was barely changed on the euro at $1.3325 after strong growth in the Institute for Supply Management's services index on Tuesday put the brakes on the past month's sharp sell-off.

Still, the dollar lingered near a 20-month low against the euro and a four-month trough versus the yen on expectations the Federal Reserve will cut interest rates next year.

''If the U.S. is heading towards a slowdown in growth and a rate cut in the near future, we could see some more dollar selling,'' said Nobuo Ibaraki, forex manager at Nomura Securities.

Traders said that the yen would remain supported given that the Bank of Japan is expected to raise rates, perhaps as early as later this month.

SHARES MIXED Japan's Nikkei average ended 0.65 percent higher at 16,371.28, while the broader TOPIX index rose 1 percent to 1,615.17.

Tyre maker Bridgestone Corp. jumped 3.5 percent on news that it would purchase U.S. firm Bandag Inc. for $1.05 billion in cash. Investors also bought shares with high dividend yields such as utility firms Kansai Electric Power Co. Inc. and Tohoku Electric Power Co. Inc.

The Nikkei was capped by concerns over a strong yen and also selling in the futures market, where the December contract was under pressure ahead of its expiry on Friday.

MSCI's broadest index of Asia shares outside Japan edged up 0.74 percent by 0610 GMT, extending its record-breaking streak.

Australia's S&P ASX 200 rose 0.7 percent, buoyed by firmer metals prices that supported mining companies, while Hong Kong's Hang Seng index was up 0.5 percent.

But Seoul stocks fell 0.5 percent to their lowest close in a week as the won's surge to a fresh nine-year high versus the dollar hurt exporters such as LG Electronics Japanese government bonds slipped further from 9-month highs following a drop in U.S. Treasuries. The market showed little reaction to comments by a Bank of Japan policy board member that the central bank needed to examine various data in guiding monetary policy as uncertainties were heightening.

The benchmark 10-year yield rose 0.5 basis point to 1.645 percent.

Gold dropped nearly $5 after the dollar rebounded overnight. Spot gold rose as high of $642.90 an ounce, steady from $642.30/643.80 an ounce late in New York on Tuesday, before hitting a low of $637.50 an ounce.

Oil prices stalled around $62.50 as caution set in ahead of the release of U.S. inventory data, seen as likely to show a fall in heating fuel stocks.

Analysts polled by Reuters expect U.S. government data on Wednesday to show a 500,000-barrel decline in distillate stocks, which include heating fuel, following higher demand after a major snow storm hit the northeast U.S. over the weekend.

Oil was also supported by the prospect of further supply cuts as most OPEC ministers have said they still see the need for a further output cut when they meet in Abuja on Dec. 14.

REUTERS PV HS1256

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