GLOBAL MARKETS-Investors fret over weak dollar, Japan growth

                                
 By Tom Miles
                                
 HONG KONG, Feb 28 (Reuters) - Asian shares clawed back some
early losses on Thursday after tumbling on worries about the
weak dollar, which could prop up the U.S. economy at the
expense of Asia's exporters, and growing fears for Japan's
economic outlook.
                                
 Fears for the health of the U.S. economy have plagued world
stocks for months.
                                
 Bargain hunting had pulled equity markets out of January's
nosedive but the wobbles returned after Federal Reserve
Chairman Ben Bernanke signalled on Wednesday that the U.S.
economy might need more interest rate cuts [ID:nN27381101],
highlighting the severity of the symptoms and sparking a
sell-off of the dollar.
                                
 The dollar's fall, exacerbated by upbeat comments about the
eurozone from the European Central Bank, spells a tougher U.S.
export market for Asian and European companies.
                                
 "The euro is drawing money because prospects of a near-term
rate cut have been pushed back and fundamentals are solid,
while the dollar is destined to fall further as the market
believes U.S. credit jitters are far from being resolved," said
Hideki Amikura, a forex manager at Nomura Trust and Banking.
                                
 Bernanke will continue his testimony [ID:nN27437254] to the
House Financial Services Committee later on Thursday.
                                
 A weakening U.S. currency, which hit a record low against
the euro on Wednesday, triggers dollar-denominated rises in
commodity and oil prices that are near all-time highs because
of sustained demand from Asian buyers and safe-haven
asset-shoppers, as well as supply problems around the world.
                                
 Both crude oil <CLc1> and gold <XAU=> stayed just shy of
the all-time highs they recorded earlier this week, with oil
trading at $99.40 a barrel and gold fetching around $957 an
ounce.
                                
 "In times of sharp rises in prices, it's a must to remember
there are plenty of investors and traders waiting to re-enter
on dips," Pradeep Unni, an analyst at Vision Commodities in
Dubai, said of the gold market.
                                
 "The Federal Reserve is likely to slash rates further on
March 18, propelling gold further north. Multiple closings
above $950 would mean sustained gains in coming days."
                                
 SEEING THE BRIGHT SIDE
                                
 Bloodied equity investors have also retreated to the
shelter of fixed income assets such as Japanese government
bonds.
                                
 March 10-year futures <2JGBv1>, which earlier this week hit
a two-month low of 136.89, rose as high as 137.86.
                                
 The euro held steady at around $1.51 on Thursday, while the
Australian dollar <AUD=> hit a 24-year high above $0.9450, the
South Korean won <KRW=> found a 6-week high and China's central
bank set the mid-point of the yuan <CNY=> at its highest since
Beijing revalued the Chinese currency in July 2005.
                                
 The yen <JPY=> held below 106.5 to the dollar, dismaying
investors in exporters such as Toyota Motor Corp <7203.T> and
Honda Motor Co Ltd <7267.T>, and helping drive Japan's Nikkei
<.N225> down 0.75 percent by the close. It had slumped as much
as 1.7 percent in early trade.
                                
 Japanese stocks were hit by a slide in industrial
production, twice as bad as expected, and a growth warning from
the most hawkish central bank member, heightening concern that
the world's second-largest economy may slow or even contract in
the first quarter. [ID:nT9136]
                                
 In Europe, financial bookmakers expected London's FTSE 100
<.FTSE> to open 27-30 points lower, Germany's DAX <.GDAXI>
23-29 points lower and France's CAC <.FCHI> 33-39 points lower.
                                
 A heavy corporate earnings calendar includes updates from
Royal Bank of Scotland <RBS.L>, Deutsche Telekom <DTEGn.DE> and
Bayer <BAYG.DE>.
                                
 MSCI's measure of Asia Pacific stocks excluding Japan
<.MIAPJ0000PUS> was flat, with market gains in Hong Kong and
South Korea offsetting a 2 percent fall on Australia's
benchmark S&P/ASX2 200 <.AXJO> index.
                                
 The Sydney market handed back over half the gains of the
previous three days as selling of bank stocks intensified after
strong domestic data cemented views of a rate hike next week.
                                
 But Hong Kong investors seized on Bernanke's comments as a
positive for the local property market and, cheered by the
effect of the commodities rally on resource plays such as
Sinopec Corp <0386.HK>, the Hang Seng index <.HSI> gained 0.8
percent.
 (Additional reporting by Lewa Pardomuan in SINGAPORE, Chikako
Mogi in TOKYO; Editing by Ian Geoghegan)