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By Jason Subler
SINGAPORE, June 4 (Reuters) - The dollar held onto big
overnight gains on Wednesday and oil prices remained down,
giving some support to Asian stocks and helping them recover
from fresh concerns over the impact of the credit crunch.
European shares looked set to open down, as investors await
data on the health of employment-intensive services sectors in
Europe and the United States. Financial bookmakers expected
major markets in London <>, Frankfurt <> and Paris
<> to each open roughly 35 points lower.
The dollar jumped against the euro and other major
currencies on Tuesday after Federal Reserve Chairman Ben
Bernanke gave an unusually explicit warning about the
inflationary threat from a weak U.S. currency. []
Analysts said the comments suggested the Fed was unlikely
to cut interest rates further from 2 percent, and may look to
hike borrowing costs later this year.
"It was extraordinary for the Fed to make a specific
comment on the dollar, even in the context of inflationary
risks," said Toshihiko Sakai, a manager of forex trading at
Mitsubishi UFJ Trust Bank in Tokyo. The Fed rarely comments on
the dollar because currency policy is set by the Treasury.
The dollar generally held steady on Wednesday, trading
around 105.18 yen <JPY=> and $1.5434 to the euro <EUR=>. The
stronger dollar helped push down the price of oil and other
commodities, while government bonds fell as investors bought
Asian shares.
U.S. crude <CLc1> was down a touch at $124.08 a barrel
after having fallen $3.45 the day before. Spot gold <XAU=> fell
to around $878.75/879.75 an ounce from $882.90/884.10 in late
New York trade on Tuesday.
The dollar's longer-term weakness has helped drive
commodity prices to record highs by encouraging the purchase of
dollar-denominated commodities as a hedge against inflation.
Shares rose in the face of continuing jitters over the
vulnerability of the financial sector to the credit crunch, set
off earlier this week when a ratings agency downgraded three
U.S. brokerages and as the Wall Street Journal reported that
Lehman Brothers <LEH.N> may need to raise more capital.
Japan's Nikkei share average <> closed up 1.6 percent,
led by exporters like Sony Corp <6758.T> on the softer yen.
Honda Motor Co Ltd <7267.T> jumped over 8 percent after it
reported double-digit growth in U.S. sales in May,
outperforming other auto makers. []
The MSCI index of shares in the Asia-Pacific region outside
Japan <.MIAPJ0000PUS> was up 0.2 percent, while a pan-Asian
index <.MIAS00000PUS> was up 1.0 percent.
The Korea Composite Stock Price Index <> closed up a
preliminary 0.8 percent, as the easing in oil prices helped
auto makers and airlines such as Hyundai Motor <005380.KS> and
Asiana Airlines <020560.KS>.
BONDS PULL BACK
Bucking the trend was the Shanghai exchange, which saw the
shares of Chinese telecoms firms fall on worries over plans for
industry restructuring.
The Shanghai Composite Index <> was down 1.7 percent.
Hong Kong's Hang Seng Index <> reversed early losses to
rise 0.3 percent.
Bernanke's comments brought into focus expectations that
the Fed will stop in its cycle of lowering interest rates,
helping send U.S. Treasuries down on Wednesday.
The yield on the 10-year note <US10YT=RR>, which moves in
the opposite direction to the price, rose to 3.921 percent, up
2.7 basis points from late New York trade.
Japanese government bond futures fell after matching their
biggest daily gain in five years on Tuesday, as investors took
profits on the sharp rise.
June 10-year JGB futures <2JGBv1> fell 0.67 point to
134.68, after Tuesday's 1.43 point rise. The benchmark 10-year
yield <JP10YT=RR> rose 3.5 basis points to 1.775 percent, after
falling sharply the day before.
"There is no new factor to change the big picture as long
as expectations for a recovery in the U.S. economy remain. JGB
yields will likely stay near the upper end of the recent
range," said Yasuhiro Onakado, chief economist at Daiwa SB
Investments.
The Australian dollar rose against the U.S. currency after
gross domestic product data for the first quarter was stronger
than expected, showing seasonally adjusted quarterly growth of
0.6 percent.
The Aussie <AUD=> was at $0.9562, up from $0.9495 before
the data was released.
(Additional reporting by Chikako Mogi and Satomi Noguchi in
Tokyo; editing by Neil Fullick)
