* Dollar edges up on short-covering, still seen vulnerable
* South Korea drags down Asia stocks 0.4 pct
* Trade limited due to Japan, U.S. holidays
* Oil extends gains on global recovery hopes
By Eric Burroughs
HONG KONG, Oct 12 (Reuters) - The dollar edged further
away from 14-month lows on Monday as investors trimmed bets
against the beleaguered U.S. currency, while South Korean
stocks dragged down other Asian markets on worries
third-quarter earnings may not live up to expectations.
Activity was limited due to a holiday in Japan and with
most U.S. financial markets closed later in the day for the
Columbus Day holiday.
South Korea's KOSPI led the decline among Asian markets and
shed 0.9 percent, hurt by heavyweights such as Samsung
Electronics <005930.KS> and steelmaking giant POSCO
<005490.KS>.
POSCO, the world's fourth largest steelmaker, is expected
to report upbeat earnings and give positive guidance on
Wednesday, benefitting from improving demand and lower raw
material costs.
But some investors were starting to get nervous about the
third-quarter earnings season.
Earnings results from major U.S. banks and companies this
week are seen as a key reality check for whether a seven-month
rally in stocks this year has more legs. []
"Cost cutting has been the main driver of second-quarter
earnings, but the main focus in Q3 is the ability to generate
revenue," said analysts at Calyon in a note to clients.
The MSCI index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> dipped 0.4 percent, with material and financial
shares among the biggest drags. The Thomson Reuters regional
index <.TRXFLDAXPU> was also down 0.4 percent.
The dollar won a brief reprieve late last week from a
steady slide that has raised worries about the waning status of
the world's reserve currency and prompted some central banks in
Asia to intervene in foreign exchange markets to stem
corresponding gains in their own currencies.
The dollar index, a gauge of its performance against six
major currencies, edged up 0.1 percent to 76.502 <.DXY> after
falling as far as 75.767 last week. The dollar climbed 0.5
percent to 90.15 yen <JPY=>, while the euro shed 0.2 percent to
$1.4703 <EUR=>.
The greenback has been battered by investors shifting funds
out of safe-haven U.S. Treasuries and money markets and into
higher-yielding emerging market assets, and by worries that
central banks are cutting their share of foreign reserves held
in dollars.
Thailand's central bank governor signalled on Monday that
it would intervene further to curb gains in the baht against
the dollar and said it was diversifying reserves after weeks of
such intervention <THB=>. []
South Korean government bonds dipped despite the drop in
stocks, giving up some of their big gains from Friday when the
Bank of Korea tried to tamp down expectations for an interest
rate increase as soon as next month.
Three-year KTB bond futures <KTBc1> dipped 0.01 point to
109.05.
Gold edged up near last week's record but the dollar's
rebound as well as worries about falling jewellery demand in
main consumer India were likely to limit gains.
Spot gold <XAU=> was quoted at $1,049.80 an ounce at 0428
GMT, up $1.55 from New York's notional close and within
striking distance of a lifetime high of $1,061.20 an ounce
struck last Thursday.
Bullion, which attracts safe-haven buying in times of
uncertainty, gained nearly 5 percent last week, its best weekly
performance in nearly half a year.
Oil futures <CLc1> rose over 1 pct to top $72 a barrel on
growing optimism about the pace of the global economic recovery
and a positive demand forecast from the International Energy
Agency (IEA).
The IEA said world oil demand will recover at a faster pace
than previously expected for the rest of this year and next as
the economy picks up.
(Editing by Kim Coghill)
