Tokyo shares fell on Monday as investors locked in profits on recent high-fliers, while the dollar eased as tepid U.S. data and comments from a Fed official soothed fears that a rate rise could come sooner than expected. Gold rose sharply on the weak dollar and safe-haven buying on worries that Israel's killing of a Hamas leader on Saturday could trigger a wave of violence in the Middle East. Stock benchmarks in Australia <.AXJO> and Singapore <.STI> edged up, while South Korea <.KS11>, Taiwan <.TWII> and Hong Kong <.HSI> dropped slightly. Japan's Nikkei average <.N225> had fallen 1.5 percent by midday to 11,645.34 after scaling 32-month highs last week. "Banks have been overbought in recent sessions, so many investors were seeking a chance to cash in profits," said Terushi Hirotama, head of trading at Ichiyoshi Securities. Japan's banking sector subindex <.IBNKS.T> was down 6.5 percent. An MSCI index of Asia Pacific shares outside Japan <.MSCIAPJ> was up 0.3 percent by 0215 GMT, but off around three percent from four-year highs hit last week. Markets saw volatile trading last week dominated by fears of a U.S. interest rate rise after a string of upbeat data and concerns over security in Iraq. Israel's killing of a Hamas leader was expected to spark fresh caution among investors. Weak Tokyo shares saw Japanese government bond prices rise, pushing the benchmark 10-year yield to a 10-day low.
DOLLAR DIPS <.br> The dollar softened, taking a breather from its recent rally after U.S. industrial production unexpectedly dropped in March while consumer sentiment slipped in early April. At 0215 GMT, the euro was trading at around $1.2027 up from $1.1995 in late New York trade on Friday. Sterling was also up against the dollar, fetching $1.8023 compared with $1.7970. Against the Swiss franc , the dollar was at 1.2899 francs, down from 1.2950 francs. Against the yen, the dollar rose to around 108.02 yen from 107.85 yen in New York, but was still well below a one-month peak of 109.28 yen scaled on Thursday.
With interest rates in mind, investors in Japan and elsewhere were waiting to hear from Federal Reserve Chairman Alan Greenspan, who will testify before the congressional Joint Economic Committee on Wednesday. A Fed official said on Friday the central bank was some distance from tightening monetary policy. U.S. technology stocks sagged on Friday after disappointing earnings news from International Business Machines Corp and Nokia Corp , although blue chips ended higher as fears of an imminent interest rate hike began to ease. The Dow Jones industrial average <.DJI> rose 0.52 percent, while the tech-heavy Nasdaq <.IXIC> slipped 0.32 percent on Friday. In Japan, the benchmark 10-year JGB yield <0#JPTSY=JBTC> fell two basis points to 1.475 percent, its lowest in 10 days. Spot gold was fetching around $403.65 an ounce, up from $400.15 in New York trade, while oil slipped seven cents a barrel to $37.67.///