* Investors still see US stimulus cut later this year
* Indian markets roiled by surprise rate hike by c.bank
* European shares seen opening slightly down
* Euro near 7 1/2-mth high vs dlr but cautious ahead of
By Hideyuki Sano
TOKYO, Sept 20 Asian shares ran out of steam on
Friday, as investors pondered the Federal Reserve's next move,
but a regional benchmark was on track for its best week in more
than a year thanks to the U.S. central bank.
Indian financial markets were roiled after the Reserve Bank
of India unexpectedly raised the key policy rate by 25 basis
points, triggering a fall in the country's currency, shares and
European shares are expected to open lower, with both
Germany's DAX and Britain's FTSE seen down 0.2
Most Asian indexes softened after Thursday's surge following
the Fed's shock decision not to reduce its monetary stimulus at
this time. Asian trading was slowed by holidays in China and
MSCI's broadest index of Asia-Pacific shares outside Japan
was down 0.2 percent on Friday. But for the
week, it was up 3.1 percent. If that is sustained, it will be
the biggest gain since the week ended Sept. 14, 2012.
The Fed's decision sparked a broad-based rally in global
stocks, commodities and riskier currencies as sentiment was
buoyed by the prospect of cheap dollars sloshing around
financial markets for some more time.
That gave a much-needed fill-up to emerging markets, which
had suffering for months from concern that an end of cheap
dollars could cause capital outflow.
"In a way, the decision was good for the global economy in
the short term. But it's a bit like you were supposed to have an
injection but you decided not to, because it looked painful.
Whether it was a right call remains to be seen," said Arihiro
Nagata, head of foreign bond trading at Sumitomo Mitsui Banking
Fed tapering expectations were kept alive by data on
Thursday showing U.S. home resales surged in August to a
6-1/2-year high and factories grew busier in the Mid-Atlantic
region this month.
That helped push the U.S. 10-year notes yield back up to
2.73 percent from a five-week low of 2.67 percent
touched just after the Fed's decision.
Many market players still expect the Fed to start reducing
its stimulus later this year.
The dollar index, which measures it against a basket of six
major currencies, stood little changed at 80.35 ,
off seven-month lows of 80.06 hit on Wednesday.
"We think the dollar is likely to recover quickly versus the
lower yielding currencies in the G10," analysts at BNP Paribas
wrote in a client note.
The euro held not far from a 7 1/2-month high of $1.3568 hit
on Thursday, last trading at $1.3533.
The common currency has been supported by signs of recovery
in the euro zone economy, but some investors are getting nervous
ahead of Germany's election on Sunday.
While Chancellor Angela Merkel is likely to win her third
term, her lead has narrowed in recent opinion polls and a new
eurosceptic party, Alternative for Germany, could make headway
in the parliament, which could rattle some investors.
"If the party gets 5-to-6 percent of the vote, people will
start gauging the risk of Germany leaving the euro. That would
be negative for the euro zone shares," SMBC's Nagata said.
As the dust settles from the Fed's jolt, some Asian
currencies could come under renewed pressure, some analysts
The Indian rupee fell 1.0 percent to 62.40 to the
dollar while Indian shares fell more than 2 percent.
The Indonesian rupiah gave up some of Thursday's gains to
trade at 11,390 per the dollar, down 1.0 percent on the
day. Jakarta shares, which jumped 4.7 percent on
Thursday, lost 1.3 percent.
In the commodities market, U.S. crude futures
extended losses on Friday after a 1.5 percent drop the previous
day on increased Libyan production signs of diplomatic thaw
between Iran and the West.