Asian shares fueled by Wall Street's rise on weaker dollar

By Lisa Twaronite

TOKYO (Reuters) - Asian shares started the week on a strong note on Monday after a weaker U.S. dollar helped fuel solid gains on Wall Street.

The greenback took back a bit of lost ground in Asian trading, with the dollar index (DXY) edging up about 0.1 percent to 98.024, moving well away from last week's low of 96.628.

MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) added about 0.4 percent.

Australian shares turned negative, with the S&P/ASX 200 index (AXJO) coming with a few points of topping the 6,000 level for the first time in seven years, before dropping as investors took profits.

Japan's Nikkei stock average (N225) extended gains, rising about 1.1 percent to 19,769.71 by the end of the morning session, refreshing a 15-year high and closing in on its own big-figure milestone.

"Sentiment for Japanese stocks has been positive, and the 20,000-mark is in sight in the short-term," said Isao Kubo, equity strategist at Nissay Asset Management.

The dollar had rallied in recent months on expectations that the U.S. Federal Reserve was preparing to hike interest rates later this year. Its strength raised fears about the profits of U.S. multinational companies, so its weakness at the end of last week helped power Friday's gains in U.S. shares.

The dollar plunged on Wednesday after the Fed cut its inflation outlook and its growth forecast. Market players' consensus expectation for the U.S. central bank's interest rate hike have shifted, with a majority of Wall Street's top banks now expecting that the Fed will hold off raising rates until at least September, and the odds for a June hike fading, a Reuters poll showed.

"Due to the light economic calendar in the week ahead, the key issue facing market participants is whether the bout of profit-taking on long dollar positions is over," Marc Chandler, chief currency strategist at Brown Brothers Harriman in New York, said in a note.

Against the yen, the dollar stood at 120.05 yen , nearly flat on the day and well below Friday's session high of 121.205.

The euro traded at $1.0789 , down about 0.3 percent and though and well above a 12-year trough of $1.0457 logged a week ago, after which the Fed's statement helped it mark its biggest weekly rise against the greenback in three years.

Concerns about Greece's ongoing fiscal woes were likely to cap the euro's upside, even after European Union leaders welcomed a pledge on Friday from Greece to meet creditors' demands for a broad package of economic reform proposals within days to unlock the cash Athens needs to avoid stumbling out of the euro zone.

Commodity currencies benefited after the dollar's rally paused. The Australian dollar added about 0.2 percent to 0.7785 , well above a six-year nadir of $0.7561 hit on March 11.

Crude oil slipped on Monday after strong gains in the previous session as it benefited from the dollar's descent. Saudi Arabia said over the weekend that it would not unilaterally cut its output to defend prices.

Brent was down 0.8 percent at $54.86 a barrel after snapping two straight weeks of losses, and U.S. crude shed 1.2 percent to $46.02 after marking its first positive week in five.