* Nikkei up 0.7 percent, MSCI Asia ex-Japan gains 0.6
percent
* Euro breaches 120 yen, close to 5-month high against
dollar
* U.S. crude rises above $108 a barrel
By Alex Richardson
SINGAPORE, April 4 (Reuters) - Asian shares rose to
their highest in nearly 3 years on Monday after strong U.S. jobs
growth spurred optimism about the global economy, and the euro
hit an 11-month peak against the yen amid expectations of a euro
zone rate hike later this week.
Data showing U.S. employment grew solidly for a second month
in March boosted Wall Street on Friday. Investors interpreted it
as a sign of a strengthening economic recovery, although most
analysts did not expect it to prompt the Federal Reserve to
change its ultra-loose monetary policy for the time being.
In contrast, the European Central Bank is seen as almost
certain to raise borrowing costs by 25 basis points on Thursday,
supporting the single currency despite worries about the
crushing debt burden of some euro zone countries.
"Firmness in U.S. shares and the weakness of the yen,
especially against the euro, encouraged buying in the
export-related sector," said Mitsushige Akino, chief fund
manager at Ichiyoshi Investment Management in Tokyo.
U.S. crude oil rose near its highest in 2-1/2 years as
unrest in the Middle East and fighting in Libya stoked fears of
supply disruptions. Gold edged up, supported by crude prices and
the stronger euro.
Japan's Nikkei rose 0.7 percent, spurred on by gains
on Wall Street on Friday, when the S&P 500 rose 0.5
percent.
The weakening yen may help Japanese exporters, although the
outlook for Japan remains clouded by uncertainty over the full
cost of a devastating earthquake and tsunami on March 11.
Big Japanese manufacturers expect business conditions to
worsen in the next three months, responses to a Bank of Japan
survey collected after the quake showed, as rolling power
blackouts and a nuclear safety crisis threaten to delay the
return to a moderate economic recovery. []
Although it has recovered much of the ground lost during its
steep tumble in the aftermath of the quake, the Nikkei remains
nearly 5 percent below its March 11 close.
MSCI's broadest index of Asia Pacific shares outside Japan
rose 0.6 percent and touched its highest level
since May 2008, its second near 3-year peak in as many days.
Emerging markets -- led by Asia -- saw their first monthly
gain of the year in March, outperforming world and developed
market stocks for the first time since September, strategists at
Citi said in a note.
EURO GAINS
The euro traded around 119.80 yen , after
breaching the 120 yen level for the first time since last May.
The dollar was steady at 84.15 yen , having reached a
six-month high around 84.72 on Friday.
Investors are positioning for an increase in the ECB's key
interest rate to 1.25 percent, widening the euro zone's yield
advantage over the United States, Britain and Japan, where
policy rates remain at record lows.
Against the dollar, the single currency hit a five-month
high against of $1.4269 on trading platform EBS earlier on
Monday, having gained a lift from some stop-loss buying, traders
said, and was later buying around $1.4225 .
"Coming into the ECB meeting this week, we have to
anticipate further euro gains," said Todd Elmer, currency
strategist at Citi in Singapore.
The Bank of Japan is likely to downgrade its economic
assessment this week, which is likely to weigh on the yen. The
currency has been under pressure since a rare coordinated G7
intervention to weaken it last month.
Market players have even started talking about a return of
the yen "carry trade", the strategy of using cheap yen loans to
fund investments in higher yielding assets or currencies.
U.S. crude oil CLc1> futures rose 0.6 percent to $108.54 a
barrel, while Brent crude <LCOc1> was up 0.4 percent at $119.12.
Gold traded around $1,430 an ounce.
"We saw the continuous geopolitical risk in the Middle East
crisis, and oil prices going higher," said Darren Heathcote,
head of trading at Investec Australia.
"It certainly looks to me that gold has been tracking both
oil and euro quite closely in past few days."
Japanese government bond 10-year futures were almost
unchanged ahead of a 2.2 trillion yen auction, seen as a litmus
test of investor appetite in the new financial year, while the
benchmark 10-year yield rose 1 basis point to 1.285 percent.
(Editing by Kim Coghill)
