The U.S. dollar rose to a fresh three-month high against the euro on Wednesday and hovered near four-month peaks against the yen, amid rising expectations of strong U.S. jobs data, while most Asian shares edged lower after recent heady gains. The euro fell 0.3 percent against the dollar to around $1.2179, while the U.S. currency also rose to around 110.15 yen , just off Tuesday's four-month highs of around 110.40 yen, as investors looked ahead to February's key U.S. non-farm payrolls data on Friday. Japan's Nikkei average <.N225> was little changed, up 0.01 percent at 11,363.11 by midday, as some traders took profit after the index closed at a 21-month peak on Tuesday. However, buying of exporters such as Sony Corp <6758.T>, on the back of the stronger dollar, limited the losses. MSCI's broadest index of shares outside Japan <.MSCIAPJ> edged 0.7 percent lower as falls on Wall Street also weighed on regional sentiment.
"A strong dollar is encouraging players to scoop up exporters and tech-related issues that have lagged behind the recent rally. Though some profit-taking has started emerging, we can say sentiment is still very strong," said Fujio Ando, an analyst at Chiba Bank Asset Management. Technology bellwether Sony <6758.T> gained 0.66 percent to 4,590 yen, while Honda Motor Co Ltd <7267.T>, which generates about three-quarters of its sales overseas, was up 1.23 percent at 4,940 yen on hopes the dollar's advance against the yen would boost exporters' overseas sales.
DOLLAR GAINS AGAIN
Traders said the catalyst for the dollar's move upwards was Monday's Institute of U.S. Supply Management report, and in particular its employment index for last month which was at its highest level since 1987. This gave investors optimism about Friday's report from the Labor Department, which economists expect to show 125,000 more people on non-farm payrolls in February compared with a rise of 112,000 in the previous month. Adding fuel to the fire for the dollar's rally was Federal Reserve Chairman Alan Greenspan, who said on Tuesday that interest rates would have to rise "at some point". Largely on the back of the dollar's gains against the yen, the yield on the benchmark 10-year Japanese government bond (JGBs) hit its highest level since December on Wednesday as investors kept shunning long-dated JGBs. The yield on the current cash benchmark 258th 10-year bond <0#JPTSY=JBTC> broke through the 1.4 percent level, rising to 1.435 percent, before easing back to stand at 1.415 percent. Gains by the dollar also took the focus off Wall Street, with the Dow Jones industrial average <.DJI> closing down 0.81 percent, and the technology-focused Nasdaq Composite Index <.IXIC> falling 0.88 percent on Tuesday. Hong Kong's Hang Seng Index <.HSI> was down 1.61 percent at 13,509.04, while Taiwan shares, although still at 3-1/2-year highs, also edged lower as the Nasdaq's fall weighed on market heavyweights like TSMC <2330.TW> and financial shares. Taiwan's TAIEX <.TWII> index edged 0.04 percent lower to 6,978.11, as TSMC dropped 0.75 percent. It was a similar story in South Korea, which took a breather after Tuesday's 22-month closing high. The benchmark Korea Composite Stock Price Index (KOSPI) <.KS11> edged 0.17 percent lower. U.S. crude oil fell 18 cents to $36.48 per barrel, but remains at high levels on persistent supply concerns, while gold fell slightly on the dollar's gains against the majors, trading at $391.25 an ounce against $392.95 in New York. ((For the state of play of Asian stock markets please click on: <0#.INDEXA>))///