* Problems outside U.S. provide support to dollar
* 10-year Japanese government bond yield falls to 4-mth low
* Toyota shares up 4 pct amid broad weakness in stocks
By Kevin Plumberg
HONG KONG, Aug 8 (Reuters) - The U.S. dollar rose sharply
to a five-month high against the euro and Asian stocks fell on
Friday, as investors expected the malaise that has afflicted
the U.S. economy would spread to other countries.
While the U.S. economy has not greatly improved by almost
any measure, investors have begun to reassess other parts of
the world, particularly after the European Central Bank
president said the euro zone faces substantially weaker growth
this year and a Japanese official warned the world's
second-largest economy may be in a recession.
"We are seeing a shift away from a focus on the U.S. to a
more global problem," said Sharada Selvanathan, a currency
strategist at BNP Paribas in Hong Kong. "The dollar is getting
a boost by default."
The benchmark yield on the 10-year Japanese government
bond, which moves in the opposite direction to the price,
tumbled to a four-month low following an overnight rally in
U.S. Treasuries, as investors scrambled to the relative safety
of government debt.
This week the dollar has rallied 2 percent, as measured by
an index of six major currencies on the ICE futures exchange
<.DXY>, and has closed on a daily basis above its 200-day
moving average -- a technical signal of a potential turnaround
that has not happened since April 2006.
The euro was down more than 0.6 percent at $1.5225 <EUR=>,
extending a decline that began overnight after comments from
ECB President Jean-Claude Trichet suggested interest rates were
on hold. Against the yen, the dollar rose 0.25 percent to
109.58 yen <JPY=>.
Japan's Nikkei share average <> was down 0.6 percent,
with shares of Shin-Etsu Chemical Co Ltd <4063.T>, the world's
biggest maker of silicon wafers, the heaviest drag on the
index.
"As the government report said, the Japanese economy has
been deteriorating, and in such an environment investors cannot
buy domestic demand-oriented stocks and banks," said Kenichi
Hirano, operating officer at Tachibana Securities in Tokyo.
Toyota Motor Co <7203.T> stock jumped 4.6 percent after the
world's biggest auto maker clung to its earnings forecasts
despite a 28 percent fall in quarterly net profit.
Outside Japan, Asia-Pacific stocks were down 0.7 percent
<.MIAPJ0000PUS>, creeping back toward a 16-month low hit on
Tuesday. Australia's benchmark S&P/ASX 200 index <>
slipped 0.8 percent, with top banks among the biggest drags.
In the bond market, the 10-year JGB yield fell to 1.480
percent <JP10YTN=JBTC>, the lowest in four months. It later
pulled back to 1.495 percent for a decline of 2 basis points on
the day.
Short-term yields, which tend to most strongly reflect
shifts in the outlook for monetary policy, declined as well,
with the 2-year yield at a four-month low of 0.670 percent
<JP2YTN=JBTC>.
U.S. crude oil futures were steady around $120 a barrel
<CLc1> on Friday, recovering from three-month lows amid
concerns a 1 million barrel per day pipeline that was attacked
by Kurdish separatists in Turkey could remain shut for up to
two weeks.
In recent weeks, growth has overshadowed inflation as a top
concern of investors, especially with Britain, Germany, Japan
and possibly the United States all facing recession.
The U.S. Federal Reserve held rates steady at 2 percent on
Tuesday and, like the ECB, expressed concerns about both the
slowing economy and rising inflation. The Fed indicated it is
in no rush to push borrowing costs higher.
Gold <XAU=> fell further as the dollar rallied, reducing
the metal's appeal as an alternative investment. Bullion
dropped nearly $8 in New York on Thursday, and is down 11
percent since the middle of last month.
