* MSCI Asia ex-Japan falls 0.7 pct
* Dollar hits highest since July 2010 vs yen
* Nikkei jumps over 3 pct to highest since March 2011
* Firmer dollar hits precious metals, oil
* European shares likely decline
By Chikako Mogi
TOKYO, Jan 4 Asian shares fell on Friday, as
investors booked profits from a recent sharp climb after senior
Federal Reserve officials expressed concerns about continuing to
expand stimulative bond buying, but the dollar extended gains as
U.S. debt yields rose.
European shares were seen tracking Asian peers lower, with
financial spreadbetters predicting London's FTSE 100,
Paris's CAC-40 and Frankfurt's DAX would open
down as much as 0.3 percent. A 0.1 percent drop in U.S. stock
futures suggested a soft Wall Street start.
Minutes from the Fed's December policy meeting released on
Thursday showed concerns among some members of the Federal Open
Markets Committee about the potential risks of the Fed's asset
purchases on financial markets, even if it looked set to
continue an open-ended stimulus program for now.
The Fed's asset-buying policy has been pivotal in
underpinning investor risk appetite, so the more hawkish Fed
minutes unnerved financial markets.
Benchmark U.S. Treasury yields continued their
climb, hitting an eight-month high around 1.93 percent in Asia
on Friday, while key 10-year Japanese government bond yields
touched a 3-1/2-month high of 0.83 percent.
The dollar also rose on data showing U.S. private-sector
hiring improved in December, raising hopes for a strong monthly
payrolls report due later in the day, a key gauge to the U.S.
economy and the Fed's future policy course.
The dollar's rise makes dollar-based assets more expensive
for non-dollar investors, hitting precious metals and oil.
The Fed's minutes spurred consolidation from broad-based
buying which took place after U.S. lawmakers earlier this week
narrowly avoided falling off the "fiscal cliff" of automatic
taxes rises and spending cuts, which risked derailing the
"Market moves largely reflect positioning after the recent
rallies and before the nonfarm payrolls, which could tip the
markets either way," said Yuji Saito, director of foreign
exchange at Credit Agricole in Tokyo, adding that markets may be
dictated by interest rates this year, rather than risk-on,
risk-off sentiment as was last year.
MSCI's broadest index of Asia-Pacific shares outside Japan
slid 0.7 percent, after scaling its highest
since August 2011 on Thursday. But the pan-Asian index was set
to end the first week of 2013 up 1.8 percent, thanks to the New
"After the big relief rally we had on the fiscal cliff
decision and compromise, I would expect the market to
consolidate a little bit," Martin Lakos division director at
Macquarie Private Wealth, said of Australian shares
which slipped 0.4 percent, retreating from Thursday's 19-month
highs. Hong Kong shares eased from a 19-month highs,
falling 0.6 percent, but Shanghai rose 0.5 percent.
The dollar hit its highest since July 2010 against the yen
at 87.835 while the euro fell to a three-week low of
$1.3019. The U.S. dollar also touched a six-week
high against a basket of major currencies on Friday.
"Dollar-positive momentum is solid as the fiscal cliff was
averted, the overnight data was good and yields were rising. I
won't be surprised to see the dollar rise to 90 yen soon," said
Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo.
"Despite repeated Japanese intervention, the dollar had
refused to strengthen in the past, but now, it's advancing
without any action, suggesting the direction has completely
changed to support continued dollar buying," Maeba said.
The yen's tumble pushed Japan's benchmark Nikkei stock
average briefly up more than 3 percent to its highest
since March 2011, outshining the Asian regional bourses. The
Nikkei closed up 2.8 percent.
FISCAL CLIFF VS DATA
U.S. President Barack Obama and congressional Republicans
face tough talks on spending cuts and an increase in the
nation's debt limit as the hard-fought fiscal deal delayed
decisions on expenditures until March 1.
Investor sentiment was supported by recent solid data from
the world's two largest economies, the United States and China.
China's services sector saw its slowest rate of expansion in
nearly a year and a half in December, a private sector survey
showed on Friday, but underlying growth revival remained intact,
even if it were modest.
"We are coming off overbought levels today. This
cyclical-led rally in offshore Chinese shares should continue in
the next few weeks, China's improving economic data will help,"
said Wang Ao-chao, UOB-Kay Hian's Shanghai-based head of China
The U.S. economy likely added 150,000 jobs in December,
according to a Reuters survey, up from 146,000 in November. The
unemployment rate is expected to hold steady at 7.7 percent.
Resolution of the U.S. fiscal cliff crisis could weigh on
some Asian assets as investors could start to shift some money
out of overpriced Asian investments in favour of the U.S. on
brightening prospects for American stocks.
U.S. crude fell 0.7 percent to $92.26 a barrel while
Brent shed 0.6 percent to $111.47.
Spot gold fell 1 percent to around $1,645, dragging
silver down more than 2 percent to $29.48.
Despite the decline in equities markets, sentiment in Asian
credit markets remained upbeat, with the spread on the iTraxx
Asia ex-Japan investment-grade index narrowing by
two basis points.