TOKYO, Dec 30 (Reuters) - The Nikkei average is expected to edge down on the Tokyo market's final trading day of the year on Thursday as the yen's advance to a seven-week high against the dollar is likely to hurt shares of exporters.
But the Nikkei is expected to be supported by solid bargain-hunting demand as investors remain upbeat on the outlook for Japanese shares heading into next year, analysts said.
"The Nikkei is expected to be weigh down as the yen firmed to the 81 level (against the dollar), but I don't expect shares to fall sharply as there's still plenty of buying interest," said Hiroichi Nishi, general manager at Nikko Cordial Securities.
"There are high hopes that the Nikkei will perform strongly in January, so underlying bullishness is expected to stay."
Nikkei futures traded in Chicago closed at 10,345, down 0.1 percent from the Osaka close of 10,360.
Analysts said the Nikkei is expected to move in a range of 10,250 to 10,400 on Thursday, after it gained 0.5 percent the previous day.
The dollar was at 81.65 yen in early Asian trade after falling to a seven-week low of 81.61 yen.
Japanese shares are expected to supported as the Dow Jones industrial average edged higher, while firmness in commodities prices could support resource-related shares and metals smelting companies.
On charts, the Nikkei is expected to find support at its 25-day moving average, currently around 10,213.
Market participants think Japanese stocks are still undervalued compared with those in other developed markets even after having gained nearly 10 percent in the last quarter of 2010. The index is still down almost 2 percent for the year. ----------------------MARKET SNAPSHOT @ 2248 GMT ------------
LAST PCT CHG NET CHG S&P 500 1259.78 0.1% 1.270 USD/JPY 81.66 0.04% 0.030 10-YR US TSY YLD 3.3567 -- -0.135 SPOT GOLD 1411.95 0.07% 0.960 US CRUDE 91 -0.13% 0.000 DOW JONES 11585.38 0.09% 9.84 ------------------------------------------------------------- > Markets close slightly higher, strong December seen > Dollar slides after strong auction hits bond yields > US bond market seen firm as year-end approaches > Gold hits 3-week high, silver up but volume thin > Oil slips, ends lower on profit taking
STOCKS TO WATCH:
-- Sumitomo Mitsui Financial Group
Sumitomo Mitsui could raise fresh capital to fund acquisitions as Japan's No.3 bank tries to expand beyond commercial banking at home, its president said.
-- Metal smelters
Shares of Japanese metal smelting companies such as Sumitomo Metal Mining and JX Holdings, which owns Japan's top copper smelter Pan Pacific Copper, are in focus after copper prices on the London Metal Exchange reach a record high the previous day.
-- Exporters
Shares of exporters such as Sony Corp and Canon Inc are being watched after the yen hit a seven-week high against the dollar. (Reporting by Chikafumi Hodo; Editing by Michael Watson)