Asia shares up on banks, dlr at 3-mth peak vs yen

SINGAPORE, May 23 (Reuters) Asian stocks edged up on Wednesday as strong earnings forecasts boosted bank shares in Japan and South Korea, while exporters gained from a jump in the dollar to a three-month high against the yen.

Tokyo's Nikkei average closed just higher and an MSCI index of Asian shares outside Japan tiptoed to a fresh record peak. Financial bookmakers expect Britain's FTSE 100 index to opening steady to 4 points lower.

The dollar held around a six-week peak against the euro on dwindling expectations that the U.S. Federal Reserve will cut interest rates later this year after surprisingly strong data on housing and manufacturing.

The Nikkei booked a modest 0.14 percent advance as shares in Japan's top three banks extended gains on hopes for higher profits.

Mitsubishi UFJ Financial Group Inc. rose 3.7 percent, Mizuho Financial Group Inc. jumped 5.5 percent and Sumitomo Mitsui Financial Group Inc. advanced 5.4 percent.

Japan's banking sector rose 3.76 percent, taking back some of the 24 percent slide from a seven-year high in April 2006.

The sector fell on concerns about a legal crackdown at banks' affiliated consumer credit companies.

''The market has factored in the negatives, including the (consumer lender) problem, for banks,'' said Soichiro Monji, a strategist at Daiwa SB Investments.

''At the same time, earnings forecasts for this year from Sumitomo Mitsui for this year are showing a profit rise.'' The softer yen supported exporters such as Toyota Motor Corp. and tech firms, led by Advantest Corp..

Techs were also given a lift by a 0.36 percent rise in the U.S.

Nasdaq, which took the index to a six-year high on takeover talk in the gaming industry.

Expectations of stable earnings also helped Korean banks rebound from recent falls, as worries eased about shrinking net interest margins, a key profitability gauge in the sector.

Shinhan Financial Group rose 1.1 percent after Citigroup raised its share target price. The main index marched to a record-high for the third straight day.

China's stock market rose 1.1 percent to extend its giddying record run. Media reports said some 78 percent of the shares listed in Shanghai and Shenzhen had doubled since the start of this year.

Another report said Beijing was discussing a proposal to triple the stock market investment quota for foreign institutions to $30 billion.

Analysts believe the authorities will let the market continue to rise and any cooling measures would be mild.

Worries about the pace of China's economic growth were eased by a senior government economist who said the economy was not showing the classic symptoms of overheating.

Hong Kong stocks eased 0.1 percent, but record demand from individual investors pushed Belle International Holdings, China's top women's shoe retailer, up more than 35 percent on its market debut.

Australian stocks rose 0.3 percent, helped by a rebound in top banks, including National Australia Bank Ltd., which gained 0.4 percent.

The generally firm tone in Asia pushed the MSCI's measure of Asia Pacific stocks excluding Japan to a fresh record high at 447.75.

EYES ON U.S-CHINA TALKS The Dow Jones average closed flat on Tuesday after hitting an intraday record, while the broader Standard & Poor's 500 index was steady.

The dollar rose as high as 121.77 yen in Asia, its firmest level since Feb. 13, amid comments from a Fed official that backed the market's view the U.S. central bank was not rushing to cut interest rates.

Richmond Federal Reserve President Jeffrey Lacker, considered one of the Fed's more hawkish officials, said interest rates were appropriate for the Fed to achieve its aims, but may need to be reevaluated later this year [ID:nN22197119] The euro held at $1.3456, near its six-week low of $1.3436 hit on Monday. The euro was up 0.15 percent at 163.65 yen, within reach of a record peak of 163.94 yen.

Market focus is now on any comments at the end of a two-day meeting between U.S. Treasury Secretary Henry Paulson and Chinese Vice Premier Wu Yi in Washington on Wednesday.

The U.S. was impatient for more forceful Chinese action to cut its trade surplus, Paulson said in his opening remarks on Tuesday, but Wu said Beijing would not yield to pressure.

Oil rose on worries of a worsening conflict between Iran and the West over Tehran's nuclear aims, but expectations of rising U.S.

gasoline inventories helped to keep gains in check.

London Brent crude climbed 38 cents to $69.90 a barrel, within range of nine-month highs of $70.83 hit on Monday. U.S. crude rose 23 cents to $65.74.

Spot gold traded at $660.50/661.20 an ounce, above the $658.80/659.30 levels in New York, when it fell more than $3.

REUTERS PV SSC1357