* Dollar index claws higher, hovers near 10-month peak
* San Francisco Fed's Williams says Fed may end QE this year
* Nikkei pares earlier losses; Philippine shares sag
* MSCI Asia Pacific ex-Japan edges lower
By Masayuki Kitano
SINGAPORE, May 17 The dollar held firm near a
10-month high versus a basket of currencies on Friday after a
U.S. Federal Reserve official said the central bank may begin to
taper its asset buying this summer, while Asian shares were
U.S. equities had sagged on Thursday after John Williams,
president of the Federal Reserve Bank of San Francisco, said the
Fed could begin easing back on the monetary gas pedal this
summer and end bond buying late this year.
Although Williams does not have a vote in the Fed's
policy-setting panel this year, his comments had weighed on
shares, since the Fed's purchases of $85 billion a month in
bonds has been a significant driver of the rally in equities
that has taken U.S. stock indexes to record highs this year.
The dollar index, which measures the dollar's value against
a basket of currencies, rose 0.4 percent to 83.927,
nearing a 10-month high of 84.094 set earlier this week.
The dollar's strength will probably become more prominent
later this year, said Sim Moh Siong, FX strategist for Bank of
"What we're seeing right now is more of a rehearsal. It's
likely to pan out on a more sustained basis by late this year,"
"Eventually I think the broad tone of data should show that
the U.S. economy is holding up much better than the rest of the
world and that would lend more durable support for the U.S.
dollar," he said.
The dollar is likely to gain support particularly against
other low-yielding currencies such as the euro, the yen,
sterling and the Swiss franc, he added.
In the stock market, MSCI's broadest index of Asia-Pacific
shares outside Japan fell 0.3 percent to 479.75,
inching away from last week's high of 491.17, its strongest
level since July 2011.
Japan's Nikkei share average erased its earlier losses and
edged up 0.3 percent, holding near a 5-1/2-year intraday
high set on Thursday. The main index in the Philippines
fell 0.7 percent, down for a second straight day after having
set a record closing high on Wednesday.
Markets in South Korea and Hong Kong were closed on Friday
for public holidays.
Spot gold eased to about $1,380 an ounce. Gold had
hit a four-week low near $1,369 on Thursday as renewed
liquidation in gold ETFs and the recent drop below the $1,400
per ounce level hurt sentiment.
U.S. crude futures slipped to about $95 a barrel.
Economic data the previous day had stirred some negative
sentiment about the U.S. economy.
Factory activity contracted in the mid-Atlantic region in
May, ground-breaking for new homes tumbled in April and new
claims for jobless benefits spiked last week, according to three
Coupled with soft underlying inflation, the data suggested
weak demand as the U.S. economy entered the second quarter.