* Brent crude jumps 2.4 pct to 6-month peak, gold at 3-month
* Asian shares falls to 7-week low, Nikkei hits 2-month
* Yen holds near 1-week high against dollar, euro
* Indian rupee, Turkish lira hit record lows
By Dominic Lau
TOKYO, Aug 28 Jitters over a possible U.S.-led
military strike against the Syrian government knocked Asian
equities to a seven-week low on Wednesday and pushed oil prices
and safe-haven gold to multi-month highs.
An acute 'risk-off' mode also boosted the appeal of the
Japanese yen, which held near a one-week high against the dollar
and euro after having posted its biggest rally in more than two
The dour mood saw emerging market currencies extend their
sharp selloff, with both the Indian rupee and Turkish lira
hitting record lows, just as investors were pulling out ahead of
an expected cut back in stimulus by the U.S. Federal Reserve,
possibly as soon as next month.
European stocks were expected to open lower on Wednesday,
with Britain's FTSE 100 seen down as much as 0.6 percent
and Germany's DAX indicated down 0.5 percent, according
to financial spreadbetters.
The big moves in markets came as Washington and its allies
were gearing up for a probable military action against President
Bashar al-Assad's forces, which were blamed for last week's
chemical weapons attacks.
Western officials told the Syrian opposition to expect a
strike within days, and U.S. Defence Secretary Chuck Hagel said
American forces in the region were "ready to go" if President
Barack Obama gives the order.
The news on Syria overshadowed improving economic
indicators, such as rising U.S. home prices and Germany's Ifo
business survey hitting its highest in 16 months.
Overnight, U.S. and European stocks suffered their worst day
since June, and investor nervousness was reflected in a nearly
12 percent jump on the CBOE volatility index, Wall
Street's so-called fear gauge, to a two-month high.
"(The Syrian issue) is adding a layer of nervousness on top
of the debate of U.S. tapering which is having a very big impact
on carry trade globally and having a very big impact on emerging
markets," a senior trader at a foreign bank in Tokyo said.
Tokyo's Nikkei share average sagged as much as 2.6
percent to a two-month low, while the yen was largely steady at
97.120 to the dollar and 129.90 to the euro
after climbing more than 1 percent overnight.
MSCI's broadest index of Asia-Pacific shares outside Japan
shed 1.7 percent, hitting its lowest level since
July 9 and extending the previous session's 1.2 percent drop.
Emerging markets have been reeling for the past few weeks on
expectations that the Fed will reduce its $85 billion a month
bond-buying programme as soon as September.
As the selloff in deficit-stricken emerging market nations
deepened, Indonesian exchanged traded funds saw heavy
redemptions from U.S. investors overnight.
Indonesian shares tumbled as much as 3.3 percent to
a 14-month trough on Wednesday, while Philippine stocks
sank 5.3 percent, hitting a more than eight-month low, and Thai
equities dropped 2.5 percent to a near one-year low.
Indonesia's central bank board will meet on Thursday in a
surprise move amid widespread speculation it will have to raise
interest rates again to defend the fast-falling rupiah,
now its lowest since April 2009.
Suresh Kumar Ramanathan, head of regional interest rate and
FX strategy at CIMB Investment Bank, said those emerging Asian
currencies were likely to fall further until their central banks
loose monetary policy.
"Tightening of policies will exacerbate the risk of currency
weakness, raise the cost of capital, further slowdown the
economy and induce unnecessary volatility in the debt, currency
and equity markets in Asia," Ramanathan said.
The Indian rupee hit a record low to below 68 per
dollar after logging its biggest single-day fall in nearly 18
years on Tuesday after the lower house of Parliament approved a
nearly $20 billion plan to provide cheap grain to the poor,
raising concerns the fiscal deficit will blow out even further.
India's NSE share index shed 2.7 percent, hitting a near
Other emerging market currencies were also battered, with
the Thai baht falling to a low of 32.28 per dollar, its
weakest level in three years, and the Turkish lira
slumping to a record low of 2.0605 to the dollar.
The heightened geopolitical risk in the Middle East drove
the prices of gold and oil higher, however.
Brent crude prices advanced 2.4 percent to a
six-month high of $117.14 a barrel, extending Tuesday's 3.3
percent surge - the biggest one-day percentage gain in nearly 10
Gold climbed 0.8 percent to a more than three-month
high after also gaining 0.8 percent on Tuesday.