GLOBAL MARKETS-Stocks, dollar up on Fannie and Freddie rescue

* Rescue plan for Fannie and Freddie boosts stocks, bonds

* Relief rally in dollar knocks oil lower

* Relief may give way to fears about U.S. financial stability

By Kevin Plumberg

HONG KONG, July 14 (Reuters) - Asian stocks edged up, the dollar gained and government bonds fell on Monday after Washington proposed an emergency plan to rescue the top U.S. mortgage finance companies, offering to buy shares if necessary. The plan was hatched in an attempt to calm investors after Fannie Mae (FNM.N) and Freddie Mac (FRE.N) stock both plummeted more than 40 percent last week on spiralling fears that both companies, which are pillars of the housing market, were under capitalised and the credit crisis toppled a fifth U.S. bank.

However, uncertainty more than confidence remained the rule.

"Steps to shore them up is a positive but the fact that they are having difficulties in the first place is just symptomatic of a difficult environment out there. And that makes it hard to get too positive," said Greg Goodsell, equity strategist with ABN AMRO in Sydney.

Japan's Nikkei share average .N225 rose 0.7 percent, led by semiconductor equipment maker Tokyo Electron Ltd (8035.T).

South Korea's KOSPI index climbed 0.6 percent, with the no. 4 steel maker POSCO (005490.KS) paving the way higher after the company increased its earnings forecasts last week.

Australia's benchmark index .AXJO fell 0.4 percent, weighed by resource-related shares and the financial sector the largest drags.

Shares in Asia-Pacific companies outside of Japan were essentially flat on the day, according to an MSCI index .MIAPJ0000PUS.

The U.S. dollar enjoyed a relief rally on the Fannie and Freddie bailout plan, after slipping 0.8 percent against a basket of major currencies last week on concerns about the stability of the U.S. financial system.

The euro fell 0.4 percent to $1.5890 EUR= and the dollar rose 0.5 percent to 106.65 yen JPY=.

The recovering U.S. dollar knocked down oil prices, which fell more than $2 to near $143 a barrel CLc1. However, ongoing tension between the West and Iran, the world's fourth largest crude exporter, supported prices. [nL13366519].

The longer-term outlook for the dollar, however, was darker, especially if the U.S. federal government is forced to nationalise the so-called government-sponsored entities and load up its balance sheet with their debt.

"The market will remain sceptical that the government won't take full custodianship eventually. Such a development would significantly increase public debt and would be detrimental to U.S. credit ratings," said Ashley Davies, currency strategist with UBS in Singapore.