* Eyes on BoE inflation report
* Nikkei on fire, Asia stocks elsewhere steady
* Weak yen lifting shares of Japan exporters
By Ian Chua and Ayai Tomisawa
SYDNEY/TOKYO, Feb 16 (REUTERS) - Sterling rose in Asia on
Wednesday as accelerating UK inflation fueled talk of an early
interest rate rise, while a weaker yen helped to send Japanese
stocks to the highest level since last May.
Sterling rallied to a 5-1/2 month peak against a currency
basket after data on Tuesday showed inflation
in Britain jumped to 4 percent, twice the Bank of England's
target, prompting Governor Mervyn King to acknowledge that rates
might rise more rapidly than economists had expected.
Analysts now expect a rate rise in May and the next market
focus is the BoE's inflation report due at 1030 GMT.
Sterling last traded at around $ 1.6165 ,
nearing a high of $1.6170 overnight. The pound has
gained some 3 percent against the U.S. dollar so far this year.
Against the yen, the dollar last traded at around
83.75, not far from an eight-week high of around 83.90 yen
hit the previous day, helped by the recent rise in
U.S. Treasury yields.
Japan's benchmark Nikkei average extended
gains, rising 0.4 percent, and broke above 10,800 points
for the first time since May as a softer yen lifted exporters
and countered declines on Wall Street.
Tokyo Electron and Advantest were
among the exporters whose shares gained. Both stocks were
up by around 1.7 percent. A weaker yen makes Japanese exports
cheaper and boosts company profits.
"It's a weaker yen that's lifting sentiment, but
foreign investors are also picking up domestic-demand stocks,"
said Shinichiro Matsushita, a market analyst at Daiwa
Securities, adding that financials were attracting foreign
interest due to the Nikkei's strong performance.
High trade volumes also lifted the mood. The Tokyo
stock exchange's first section has seen more than 2.0 billion
shares change hands for seven consecutive sessions.
ASIAN STOCKS STEADY
Some traders said Japanese retail investors were behind
the yen's recent mild drop. The dollar could rise further as it
is seen supported with bids at levels near 84.40 yen and 84.20
yen, they said.
"Bids are starting to emerge on the downside and I
wouldn't be surprised if the dollar were to make another try for
the upside," said a trade for a Japanese brokage in Tokyo.
The euro edged up against the dollar, standing at
around $1.3530 as of 0253 GMT.
Elsewhere in Asia, MSCI's Asia Pacific share index
excluding Japan edged up 0.1 percent.
Hong Kong stocks rose 0.7 percent, while the Korea
Composite Stock Price Index (KOSPI) advanced 0.3
percent.
In Australia, BHP Billiton , the world's
biggest miner, said it planned to pour $80 billion into
expansions over the next five years and return cash to investors
rather than chase ambitious takeovers, after nearly doubling its
first-half profit to a record.
After having rallied 9 percent to a 33-month high in
recent weeks, shares of the market leader BHP fell 1.7 percent
after posting results. But Australia's benchmark S&P/ASX 200
index was little changed as banking shares weighed on
the broader market.
U.S. crude futures recovered slightly in early Asian trade
after the American Petroleum Institute (API) said U.S. crude
stocks fell unexpectedly last week as imports fell. NYMEX crude
for March delivery was up 0.38 percent, at $84.70 a
barrel.
London Brent crude futures saw similar gains,
topping $102.
(Additonal reporting by Hideyuki Sano in Tokyo and Masayuki
Kitano in Singapore; Writing by Yoko Nishikawa, Editing by Kim
Coghill)
