* Nikkei rises 0.5 percent, MSCI Asia ex-Japan flat
* Brent crude eases below $122 a barrel
* Gold close to $1,460 an ounce, below record
* Euro above $1.43, 122 yen
By Alex Richardson
SINGAPORE, April 7 (Reuters) - The euro clung near a
14-month high against the dollar ahead of an expected euro zone
interest rate rise on Thursday, while gold held close to a
record scaled on the back of the U.S. currency's weakness and
inflation worries.
Asian shares were lacklustre, with the Nikkei rising, as
investors who had bet on the falls of recent days realised their
gains, but markets elsewhere in the region were flat.
Brent crude oil eased off a two-and-a-half year peak struck
amid worries about war in Libya and unrest in the Middle East.
The Australian dollar , often seen as a play on
rising commodities prices because of Australia's large resource
sector, rose to a 29-year high against the dollar after stronger
than expected jobs data.
The Bank of Japan was expected to make no changes to its
ultra-loose monetary policy at a meeting concluding on Thursday,
but signal its readiness to take further easing steps to support
an economy disrupted by last month's devastating earthquake.
In contrast, the European Central Bank, meeting later in the
day, was widely expected to raise interest rates by 25 basis
points from a record low 1 percent to curb inflationary
pressures, widening the single currency's yield advantage over
both the yen and the dollar.
Portugal's request for European financial aid -- seen as
inevitable by the bond markets for some weeks but resisted by
Lisbon until Wednesday -- was not expected to throw the ECB off
its hawkish course.
"The yen has been falling on expectations of diverging
monetary policies between Japan, the United States and the euro
zone," said Bank of Tokyo-Mitsubishi UFJ analyst Teppei Ino.
"The market ignored Portugal's request for aid because it
was seen unlikely to stop the ECB from raising interest rates.
But the key is how much they are going to raise going forward."
The euro was down 0.1 percent at $1.4310 having risen
to $1.4350, its highest since late January 2010, on Wednesday.
The dollar stood at 85.34 yen , having risen as high
as 85.54 earlier, almost 10 yen above its record low of 76.25
yen hit in March, days after Japan's earthquake and tsunami.
The euro rose as high as 122.55 yen , just ticks
away from the previous day's 11-month peak. The Australian
dollar rose as high as $1.0481, and also rose to 89.45 yen
, its highest since September 2008.
TURNING POINT
Expectations of a turning in the monetary policy cycle, with
other developed markets starting to tighten, knocked Japanese
government bonds lower.
Benchmark 10-year JGB futures fell 0.27 point to 138.71,
while the 10-year yield rose 1.5 basis points to 1.305 percent.
The yield spread between two-year euro zone and Japanese
government bonds rose to 164.6 basis
points, its highest since December 2008.
There was little immediate market reaction to news that U.S.
lawmakers had not reached an agreement to avert a government
shutdown in budget talks with President Barack Obama.
U.S. stocks inched up on Wednesday, with the S&P 500
gaining 0.2 percent, as a weekly survey from advisers Investors
Intelligence showed the percentage of bulls rose to the highest
level in nearly four months. []
Tokyo's Nikkei share average rose 0.5 percent, while
MSCI's broadest index of Asia Pacific shares excluding Japan
was little changed. The MSCI index had hit a
succession of near three-year peaks in recent days.
Japanese shares have recouped more than two-thirds of the
losses sustained immediately after the earthquake, but remain
around 6 percent below their close on the day of the disaster.
Market players said Thursday's gains were mostly due to
traders who had gone short -- or bet on falls -- in recent days
closing out their positions by buying back beaten down shares.
Investors remain cautious about the disruption to factories
and the crisis at a crippled nuclear power plant, which operator
Tokyo Electric Power Co. (TEPCO) is still trying to
stabilise nearly four weeks after the quake.
"The market is increasingly feeling that the TEPCO nuclear
problem will take a long time," said Takashi Ohba, a senior
strategist at Okasan Securities. "People are also unsure about
production losses."
Brent crude <LCOc1> eased 0.4 percent to $121.79 a barrel,
having reached a two-and-a-half year high above $123 a barrel on
Wednesday, and U.S. crude fell 36 cents to $108.47.
Gold traded around $1,456.25 an ounce, not far off
its record $1,461.91.
Precious metals, traditionally a hedge against inflation,
have been boosted by rising commodities prices and also the
weaker U.S. currency, which makes dollar-denominated assets
cheaper for non-U.S. investors.
(Editing by Richard Borsuk)
