GLOBAL MARKETS-Japanese stocks eye 2013 peak as dollar breaks above 101 yen

Fri Nov 22, 2013 1:29am EST

* Japan shares end Friday flat, but still up nearly 10 pct
in two weeks
    * Asian stocks subdued, AUD still under pressure
    * European stocks seen opening modestly higher
    * Oil prices hold near month-highs on supply bottlenecks

    By Wayne Cole
    SYDNEY, Nov 22 (Reuters) - Japanese stocks scaled six-month
peaks on Friday as the yen took a spill, while other Asian
markets lagged as investors resigned themselves to an inevitable
slowdown in U.S. stimulus.
    Tokyo's Nikkei rallied more than 1 percent but
succumbed to profit-taking late in the session to finish 0.1
percent higher. 
    Still, it is up nearly 10 percent over the last two weeks,
setting the stage for a re-test of its 2013 peak at 15,942.
    European shares were seen starting modestly higher with
financial bookmakers expecting major European indices 
  to open up as much as 0.5 percent.
    The Nikkei and the yen have been dancing in counter-step for
months, with every rally in the share index a signal for
speculators to dump the yen. A lower currency then promises to
boost Japanese exports and earnings, further supporting shares.
    So an early spike in the U.S. dollar to above 101.20 yen
 for the first time since July was a clear green light to
buy shares. The dollar retreated to 101.10 yen as the Nikkei
lost steam.
    The euro climbed as far as 136.54 yen, highs not
seen since October 2009, before slipping back to 136.20.
    "In the last 24 hours, the yen's price action has been tick
for tick with the Nikkei," said Alan Ruskin, global head of FX
strategy at Deutsche Bank in New York.
    Bank of Japan Governor Haruhiko Kuroda gave his blessings to
the move, saying the yen was not abnormally low and there were
no signs of a bubble in shares. 
    At the same time, a swing higher in long-term U.S. Treasury
yields was expanding the dollar's rate advantage over the yen,
Ruskin added. Yields on 10-year Treasuries were at 2.78 percent
, compared to 0.65 percent for JGBs.
    "Both sides of the USD/JPY equation are working in favour of
yen weakness," said Ruskin. "The forex message this year is that
USD/JPY and USD/EMG (emerging currencies) are most vulnerable to
a back-up in U.S. long-end yields."
    Yields have moved up in expectations the Federal Reserve
will have to start tapering its asset buying at some point,
whether December or March.
    Yet Wall Street has finally accepted that such a move would
not mean the Fed was any closer to actually hiking interest
rates, keeping short-term yields low. 
    The sheer exuberance of U.S. and Japan stocks is attracting
money away from some emerging markets, part of a long-heralded
rotation of funds to the developed world.
    That shift sapped Latin American shares on Thursday
 and weighed on regional markets such as the
Philippines and India.
    Australian shares bounced 0.9 percent, but that came
after a four-session losing streak. South Korea climbed
0.6 percent, while Hong Kong advanced 0.5 percent.
    MSCI's broadest index of Asia-Pacific shares outside Japan
 rose 0.3 percent on Friday, after shedding 1.4
percent on Thursday. 
    
    OIL STEADIER AFTER RALLY  
    The U.S. dollar fared less well against the euro, which
bounced after European Central Bank President Mario Draghi shot
down a report that the central bank was actively considering
cutting a key interest rate below zero. 
    That lifted the common currency up to $1.3472, from a
one-week low of $1.3399. A couple of ECB members are talking
later on Friday, along with two more officials from the Fed.
    Currencies leveraged to commodities and global growth took a
hit with the Canadian, New Zealand and Australian dollar all
falling sharply.
    The Australian dollar took a further slug from Reserve Bank
of Australia (RBA) Governor Glenn Stevens who said he was open
to the idea of intervention to push the currency lower.
    While he added that the risks of action were still too
great, the comment served as an excuse for speculators to breach
options at $0.9250 and trigger a run to below $0.9200.
    In commodity markets, Brent crude oil held near
$110 a barrel having jumped over $2 on Thursday to its highest
in more than a month. 
    The rally was fuelled by a sharp run-up in gasoline and gas
oil prices on news of dwindling stocks and refinery glitches in
the United States and Europe.
    Upbeat U.S. economic data helped support prices, while
traders also kept an eye on talks between Western powers and
Iran on hopes of an accord over its nuclear program.
    U.S. oil was off 37 cents, but that followed a rise
of $1.59 overnight.