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* Tech sector losses biggest weight on Asia stocks
* Oil falls below $79 on stable dollar, inventories
* Market still focused on rate differentials among currencies
By Kevin Plumberg
HONG KONG, Oct 21 (Reuters) - Profit taking in the technology sector weighed on Asian stocks on Wednesday, though they stuck close to a 15-month high, while some stability in the U.S. dollar and a rise in inventories pushed oil below $79 a barrel.
A recovery in demand for IT-related products has been unmistakable and so far earnings for the sector have held up, but dealers were prone to trim bets ahead of a heavy load of Chinese economic data on Thursday and with the MSCI IT index for Asia Pacific ex-Japan <.MIAPJIT00PUS> up 87 percent so far this year.
"Investors still favoured technology shares amid a slew of positive results from U.S. tech companies, but temptation to take profits could take a toll after tech shares' recent gains," said Andrew Deng, an assistant vice president at Taiwan International Securities Corp.
The factors that have pushed global equity markets to a one-year high and knocked the U.S. dollar to a 14-month low against a basket of major currencies have not changed overnight. Yet, investors were pausing to take a closer look at where bets are stretched.
Japan's Nikkei share average <.N225> was down 0.31 percent, led by Tokyo Electron <8035.T>, the world's second-largest maker of chip equipment, and Advantest <6857.T>.
Weakness could be temporary though. A report on Tuesday showed orders for Japanese chip gear outpaced sales for the sixth consecutive month in September. [ID:nT193575]
IT STOCKS LAG
The MSCI index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> slipped 0.8 percent though was up 66 percent so far this year. The index on Tuesday hit its highest since July 31. The Thomson-Reuters index of the region's stocks <.TRXFLDAXPU> was down 0.6 percent.
The IT sector, down 1.6 percent, was the biggest underperformer, followed by the materials and telecoms.
In currency markets, the ICE Futures U.S. dollar index <.DXY>, based on its trade-weighted value relative to six other major currencies, was little changed on the day after hitting the lowest since early August on Tuesday.
The euro's inability on Tuesday to push above $1.50, a level that was fiercely protected by investors in options, has caused some dealers to slash their short-term bets on the common currency and wait to buy it back on the cheap.
The market is clearly still focused on exploiting interest rate differences between currencies. For example, the New Zealand dollar briefly cut its losses and shot to US$0.7500 after the central bank governor reportedly said currency strength will not prevent rate rises. [ID:nSYD348934]
Oil traders pushed U.S. crude for November delivery down 0.6 percent to $78.64 a barrel in response to the stabilising dollar and a report showing a bigger-than-forecast rise in U.S. oil inventories.
"There is plenty of oil around at the moment and the current price is associated with tight supply so I am a little bearish and I suspect it will adjust lower," said David Moore, commodities strategist at Commonwealth Bank in Sydney. (Additional reporting by Joan Hsu in TAIPEI and Nick Trevethan in SYDNEY; Editing by Tomasz Janowski)