GLOBAL MARKETS-Asian shares mostly retreat after rally; BOJ holds fire
* MSCI Asia ex-Japan down 0.4 pct, Nikkei hits 4-1/2-year high
* ECB and BOE meetings eyed for signs of future easing
* BOJ keeps policy on hold, market seeks action from new leadership
* Dollar index hovers near highest since August
* European shares likely inch higher
By Chikako Mogi
TOKYO, March 7 (Reuters) - Asian shares mostly fell after two strong days of gains on Thursday, with investors focusing on meetings of the central banks of Britain and the euro zone for signs of more policy stimulus after the Bank of Japan kept policy on hold.
Japan's Nikkei stock average was one major exception, soaring to its highest since late September 2008, cheered by another all-time high close for the blue-chip Dow Jones Industrial Average on Wednesday.
As market players focused on the strength of the U.S. economy, the dollar was seen drawing further support after the U.S. House of Representatives passed a measure to fund government programmes until the end of the fiscal year on Sept. 30. The Democratic-controlled Senate is expected to pass a similar bill next week. Without such legislation federal agencies would run out of money on March 27.
"The dollar is taking centre stage and likely to become the sole winner because growth is solid while monetary conditions are lax, and stocks are renewing record highs," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo.
The dollar hovered near its highest since Aug. 20 of 82.604 against a basket of key currencies hit on Wednesday, after February's better-than-expected private jobs data raised some hopes the official non-farm payrolls report due on Friday could be relatively solid.
Data showing the underlying strength in U.S. manufacturing remained intact even when new orders for factory goods fell in January on weak demand for transportation equipment supported views of a steady recovery in the world's largest economy.
"What is of interest of late is how the USD is trading as an investment currency, with good U.S. data transcending into USD strength," said Stan Shamu, market strategist at IG Markets, noting that it was often the case that rising U.S. equities would weigh on the dollar.
"The S&P is moving up in conjunction with the DXY, which is extremely interesting and if this persists we could see more and more traders buying USDs as an investment destination," he said.
European markets are seen edging higher, with financial spreadbetters predicting London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX would open up about 0.1 percent. A 0.1 percent rise in U.S. stock futures pointed to a cautious Wall Street start after the previous day's rally.
The MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.4 percent, having recouped much of its losses incurred on Monday when it tumbled to a nine-week low. The technology sector of the pan-Asian index by far was the worst performer with a 1.1 percent tumble.
South Korean stocks led their Asian peers lower with a 0.8 percent slide, stung by a 2.6 percent plunge in market heavyweight Samsung Electronics. Traders also said the weak yen, signs of escalating North Korea risk and profit-taking after recent share gains weighed on Korean shares.
Australian shares slipped 0.2 percent after figures showed the country's trade deficit widened by more than expected and investors awaited China's trade balance due on Friday. The shares earlier touched a fresh 4-1/2-year peak.
COMMITMENT TO EASY POLICY
The Bank of Japan took no fresh steps as widely expected on Thursday, the last meeting under the current order, with investors solely focused on whether the central bank will immediately launch extra reflationary steps when the new leadership takes over next month.
The Bank of England and the European Central Bank will all announce their policy decisions later in the session, with investors expecting them to maintain or extend soft policy to support fragile economies.
Speculation that the ECB would signal future interest-rate cuts and downgrade its economic assessment of the euro zone pressured the euro, which stood at $1.2991, after touching a three-month low of $1.29655 on Wednesday. The pound was down 0.1 percent at $1.5003, after falling to a 2-1/2-year trough of $1.4965 on Wednesday as markets positioned for more stimulus from the BOE.
"The BoE's decision on QE (quantitative easing) is likely to be finely balanced; however, the event carries downside risks for the GBP. While our base case remains for ECB policy to be unchanged and little news from the press conference, the risks are skewed to the downside for the EUR," Barclays Capital said in a note.
The dollar eased 0.1 percent against the yen to 93.93 . It touched a one-week high above 94 yen on Wednesday, taking it closer to a 33-month peak of 94.77 hit last week.
Japanese shares finally caught up with other major global stock indexes. By the end of 2009, both the benchmark U.S. Standards & Poor's index and Frankfurt's DAX had topped the levels of late-September 2008. The Nikkei's lagged performance underscored the depth of damage to the Japanese economy from the yen's consistent rise between 2009 and 2011.
U.S. crude eased 0.2 percent to $90.28 a barrel and Brent fell 0.3 percent to $110.75.
Spot gold was capped at $1,582.76 an ounce as signs of improvement in the U.S. jobs markets weighed on safe-haven demand.