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GLOBAL MARKETS-Currencies in focus as Obama tours Asia

Published 11/13/2009, 01:29 AM
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* U.S. dollar clings on to gains, while oil and gold fade

* Obama visits Asia with trade and currencies in focus

* Most Asian shares soft on U.S. consumer concerns

By Wayne Cole

SYDNEY, Nov 13 (Reuters) - A rare rally in the U.S. dollar was the focus in Asia on Friday as investors wondered if President Barack Obama's nine-day visit to the region would generate pressure on some countries to let their currencies rise.

The bounce in the long-suffering dollar added to profit-taking in commodities such as gold and oil, while weakness in shares across Asia supported the dollar as a safe-haven trade.

European shares also looked set to open lower as investors awaited French and German GDP figures. Obama kicks off his first official tour of Asia by meeting Japanese Prime Minister Yukio Hatoyama on Friday, then goes on to Singapore, China and South Korea. High on the agenda will be U.S. calls for Asian countries to do more to stimulate domestic demand instead of relying on exports to America. That would likely require much of Asia, and China in particular, to let their currencies appreciate. But there's an inherent contradiction in the U.S. stance.

Treasury Secretary Timothy Geithner often states his desire to see a strong dollar, yet at the same time wants Asian exporters to let their currencies gain ground against the dollar.

Asked about yuan flexibility, Thai finance minister Korn Chatikavanij sounded reluctant to press the U.S. case.

"From our perspective, what is most important is that China's economy remains robust -- we therefore should respect their economic policies, including the exchange rate policy, not least since it has delivered desired results -- to the benefit of the the global economy," he said in a Reuters Messaging chat room.

Leaders of the Asia Pacific Economic Cooperation grouping had seemed to give ground this week by backing undefined "market-oriented" exchange rates. Yet many of the same countries have been spotted intervening to buy dollars to stop a rise in their own currencies that could make exports less competitive and impede their economic recoveries.

Traders said this burst of buying caught many speculators short and was a major reason the U.S. dollar bounced so far.

The euro had pulled back to $1.4858 from Thursday's peak around $1.5048, while the dollar reached 90.20 yen from the week's 89.26 trough.

Against a basket of currencies the dollar was little changed at 75.589 by early afternoon and off 15-mth lows of 74.774, though it remains within a downtrend channel that stretches back to May.

The dollar's rise overnight added to pressure on oil, already burdened by a surprisingly large increase in U.S. crude inventories. U.S. crude oil futures for December delivery were off 7 cents at $76.87, after shedding 3 percent on Thursday.

Likewise, spot gold was dragged down to $1,105.30 per ounce from a record peak of $1,122.85 on Thursday.

U.S. CONSUMER FATIGUE

Most share markets in Asia tracked Thursday's fall in U.S. stocks, which snapped a six-day winning streak.

The Dow Jones average dropped 0.91 percent to 10,197.47, while the Standard & Poor's 500 Index fell 1.03 percent to 1,087.24.

The MSCI index of Asia Pacific stocks outside Japan followed on Friday, sliding 0.47 percent. But it still looked set to rise around 2.5 percent on the week, bringing year-to-date gains to nearly 65 percent.

Some market watchers blamed the reversal on concerns about U.S. shoppers, while others said share price valuations were getting too far ahead of economic fundamentals after a nine-month rally.

A return of strong U.S. consumer demand is vital for a sustainable global recovery, but Wal-Mart Stores Inc on THursday forecast earnings during the key holiday quarter could miss Wall Street estimates as its customers face rising unemployment.

"It is inevitable for exporters in Korea and China to be hit as U.S. retailers are unlikely to enjoy the holiday shopping season," said Choo Hee-yeop, a strategist at Korea Investment & Securities.

In Japan, the benchmark Nikkei fell 0.4 percent after snapping a four-day rising streak on Thursday and recorded its third losing week in a row.

Struggling Japan Airlines Corp as well as a slew of banks including No. 2 lender Mizuho Financial Group and No. 3 bank Sumitomo Mitsui Financial Group announce earnings results later in the day. (Editing by Kim Coghill)

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