* Bets against dollar unwind as interest rate views shift
* Russia tensions ease but keep oil market volatile
* Asia stocks bounce from 2-year low
(Corrects paragraph 11 to show Hong Kong stocks hit a
one-year low on Thursday, not Friday)
By Kevin Plumberg
HONG KONG, Aug 25 (Reuters) - The U.S. dollar rose broadly
on Monday, hitting a two-year high against sterling, with a
downtrend in commodity prices intact, leaving investors
scurrying to buy back the currency and sparking a rebound in
Asian stocks.
European stock markets were expected to open little
changed, according to financial bookmakers, with volumes likely
lower than average because of a UK public holiday.
Recent reports showing shrinking or no economic growth in
Britain, the euro zone and Japan have boosted the attraction of
the dollar as an alternative investment, especially with crude
prices trading more than $30 below a record high hit in July.
A rally in the dollar stalled last week after hitting a
six-month high against the euro, but an upward trend in the
U.S. currency is seen intact.
Even billionaire investor and long-time dollar detractor
Warren Buffett, chairman of conglomerate Berkshire Hathaway Inc
<BRKa.N>, came to the currency's aid on Friday when he said in
a television interview that he had no bets against the dollar.
"The combination of incremental weakness in the European
economy and the lower oil prices should keep the pressure on
euro/dollar in our view," Nizram Idris, currency strategist
with UBS in Singapore, said in a note.
Asian stocks rebounded from a two-year low as the drop in
oil prices back below $120 a barrel lifted shares of companies
sensitive to energy prices, though trading volumes across the
region were quite thin, suggesting a lack of conviction among
investors.
Japan's Nikkei share average <> ended up 1.7 percent,
after shares of Japan's second-largest car maker, Honda Motor
Co <7267.T>, led the way higher.
The MSCI pan-Asia stocks index <.MIAS00000PUS> was up 1.6
percent, after hitting the lowest since July 2006 on Friday.
The MSCI Asia-Pacific ex-Japan index <.MIAJP00000PUS> rose 1.2
percent. Australia's benchmark share index <> was up 1.7
percent, helped by rallying shares of the country's top banks.
Hong Kong's Hang Seng index <> led the region, up 3
percent after plumbing a one-year low on Thursday and being
closed on Friday for a typhoon. Shares of offshore Chinese oil
producer CNOOC <0883.HK> were up 4.3 percent and among the
biggest boosts to the index, with the company expected to
report solid first-half results on Wednesday.
RISK PROFILE
The euro <EUR=> fell 0.4 percent to $1.4721, about a cent
away from last week's low.
The British pound had fallen as low as $1.8405 <GBP=>, its
lowest since July 2006. Sterling was hurt by data on Friday
that showed UK gross domestic product was unchanged in the
second quarter compared with an initial estimate of 0.2 percent
growth -- bolstering the case for lower interest rates to spur
activity.
Oil crept up to $115, after suffering the biggest daily
decline since 2004 on Friday, on Russia's pledge to withdraw
the bulk of its troops from Georgia and the uneventful passing
of Tropical Storm Fay near the Gulf of Mexico.
"The easing of Tropical Storm Fay and the pullout of
Russian troops from Georgia has taken some risk premium out of
the market," said Toby Hassall, chief analyst at Commodity
Warrants Australia in Sydney.
"But there will be some degree of geopolitical tensions as
long as Russia still has troops stationed in Georgia."
U.S. light crude for October delivery <CLc1> rose 52 cents
to $115.11 a barrel though it is close to a near four-month
closing low of $112.87 touched a week ago.
Crude's large drop so far, however, has not been enough to
entice fund managers to take on more risk for higher returns.
Some instruments used to measure risk have been reflecting
relatively low market volatility, and equity valuations have
become attractive.
Hopes of a saviour for beleaguered Lehman Brothers Holdings
Inc <LEH.N> pushed up shares in the investment bank on Friday
after the state-run Korea Development Bank said on Friday
buying Lehman is an option.
Still, regional risk measures show investors frozen in
cautious mode rather than ready to dive back into markets in
search of bargains. The iTRAXX Asia ex-Japan index of
high-yield credit default swaps <ITAHY5UA=GFI> has been stable
in the last month, between 515 and 560 basis points.
That range is smack in the middle of a record high hit in
March amidst the meltdown of Bear Stearns and a low in May when
stock markets recovered. Credit default swaps are
insurance-like contracts that protect against corporate
defaults and restructuring.
"Even with oil prices down, the global liquidity crunch
remains very much with us," said Clive McDonnell, regional
strategist with BNP Paribas in Hong Kong.
"U.S. and European portfolio managers continue to reduce
risk in their portfolios; emerging markets are the higher risk
asset class, hence we are suffering disproportionately," he
said.
Gold cut some of its earlier losses to trade down 0.2
percent at $821.10 an ounce <XAU=> in the spot market, having
shed more than $150 in the last month as oil prices fell and
the dollar strengthened.
