(Adds Fitch affirmation of US 'AAA' rating)
* Asia shares aided as Wall St recoups post-Fed losses
* Dollar underpinned as short-term US yields hit 6-mth peak
* China's yuan heads for sharpest fall in two decades
* Quartet of Fed speakers set to test market nerves
By Wayne Cole
SYDNEY, March 21 Asian markets found their
footing on Friday after Wall Street shook off concerns about
Federal Reserve policy, while a spike in U.S. bond yields kept
the dollar underpinned near three-week highs.
After falling sharply on Thursday, regional stocks battled
to regain some of the losses. The Australian market edged up 0.7
percent while MSCI's broadest index of Asia-Pacific
shares outside Japan added 0.5 percent.
Hong Kong and China stocks also rebounded,
despite growing concerns about fallout from China's economic
slowdown and a further slide in the yuan to 13-month lows.
Investors found some comfort in Wall Street's ability to
bounce as the S&P 500 closed up 0.6 percent and the Dow
0.67 percent. Japan's Nikkei was not able to
share the relief because markets were closed for a holiday.
Ratings agency Fitch removed one potential danger by
affirming the United States' triple 'A' rating while taking it
off negative watch, citing strong fiscal consolidation and the
advantages of having the world's reserve currency.
The U.S. dollar continued to benefit from Fed Chair Janet
Yellen's suggestion that the first increase in interest rates
could come in the first half of 2015, which would be earlier
than many had expected.
Just the thought of such a prospect was enough to lift
two-year Treasury yields to their highest in six
months and left them up 8 basis points for the week so far.
Markets will thus be hyper-sensitive to comments from a
quartet of Fed speakers later on Friday. St. Louis Fed President
James Bullard, Dallas Fed President Richard Fisher, Minneapolis
Fed President Narayana Kocherlakota and Fed Governor Jeremy
Stein are all due to talk.
Clarity may not be forthcoming, however, as each has very
different outlooks on policy, stretching from the hawkish Fisher
to the dovish Kocherlakota.
Against a basket of major currencies, the U.S. dollar was
trading at 80.163, not far from the high of 80.354, a
level not seen since late February.
The euro wallowed at $1.3783, having plumbed a
two-week low of $1.3749. It was on track to post a 1.0 percent
drop this week.
Not helping the common currency, European Central Bank
Executive Board Member Sabine Lautenschlaeger said rates will
remain low or go even lower for an extended period.
The U.S. dollar was steady on the yen at 102.35
having topped out at 102.69.
HOW FAR WILL IT FALL?
Attention in Asia was again on China's yuan, which extended
recent losses, with the People's Bank of China (PBOC) seemingly
content with the decline. The currency has fallen more than 1.2
percent so far this week, which would be the largest weekly loss
In chaotic early trade, the yuan bounced in range
between a low of 6.2374 per dollar, its weakest since Feb. 25,
2013, and a high of 6.2224. It later appeared to steady around
6.2231, but has had a habit of taking sudden lurches lower this
Government economists and advisers involved in internal
policy discussions told Reuters that the central bank chose to
widen the yuan's trading band since it was less risky than other
reform options while also offering a way to hedge against
further economic slowdown.
A weaker yuan would provide some relief to struggling
exporters and the PBOC has the means to steer it lower while
avoiding sharp swings.
However, a major drop in the yuan could put pressure on
other nations in the region to depreciate their currencies and
keep their exports competitive.
Several currencies from the Thai baht to Malaysian ringgit
have indeed turned lower over the last couple of days and
dealers are watching nervously to see if that could be the start
of a trend.
In commodity markets, gold was pinned at $1,332.70 an ounce
having shed 3.6 percent for the week so far.
Brent eased 39 cents to $106.06 a barrel, while U.S.
crude for May delivery lost 59 cents to $98.31 per
(Editing by Eric Meijer & Kim Coghill)