* Dollar index pulls up from 10-month trough
* Asian stocks lower, but Nikkei rises on short-covering
* Gold, silver weighed down by dollar's rise
* Bernanke cements expectations for Fed easing
(Repeats to more subscribers)
By Vikram S.Subhedar
HONG KONG, Oct 18 (Reuters) - The battered dollar rose on
Monday to edge further away from a 10-month low on Friday,
while a rally in Asian stocks paused as investors took some
profits ahead of a widely expected easing in U.S. monetary
policy.
Fed chief Ben Bernanke cemented expectations on Friday of
more U.S. stimulus to lower unemployment and fend off
deflation, prompting a reversal of trades that had been pushing
the dollar lower and most Asian stocks higher for weeks.
[]
The prospects of the Fed pumping billions of dollars into
its economy has sparked huge capital flows into high-yielding
emerging markets, pushing up their currencies and prompting
some countries to take steps to control the inflows from
destablising their economies. The Fed reviews policy Nov. 2-3.
Rising global currency tensions, pitting the developing
world against the developed world, will be the focus of a
meeting of G20 finance leaders in South Korea, starting on
Friday.
Asian stocks outside Japan <.MIAPJ0000PUS>, which have
rallied steadily since last August, fell 0.9 percent on Monday.
Taiwan <> led the decline, falling 1.3 percent, on
concerns that a rise in the local currency against the U.S.
dollar could damage the island's major technology exporters.
"The key concern is still the appreciation of the Taiwan
dollar, so most technology shares weakened," said Tom Tang, a
vice president at Masterlink Investment Advisory.
Japanese shares rose, however. The Nikkei average <>
gained 0.5 percent, drawing some support from strength on the
U.S. Nasdaq <> following blow-out third-quarter results
from internet search giant Google <GOOG.O>. []
Traders were reluctant to take large fresh positions though
with short-term players mostly taking cues from movements in
the yen, which stayed close to a 15-year high against the
dollar.
"The Nikkei rebounded on short-covering after last week's
loss but the market is having difficulty finding a clear
direction without any new incentives," said Nagayuki Yamagishi,
strategist at Mitsubishi UFJ Morgan Stanley Securities.
The yen inched up to 81.35 <JPY=> against the dollar,
holding near the 15-year high of 80.88 reached last week.
The dollar index <.DXY> rose 0.4 percent, as traders pared
short-positions and as investors bet the Fed would be
successful in generating more inflation. The index is still
down more than 6 percent following a selloff since a September
high.
The rebound in the dollar pulled metal prices lower in
Asian with spot gold <XAU=> down over 0.7 percent and silver
<XAG=> trading about 2 percent lower.
The weakening trend in the dollar had drawn funds to
commodities and had propelled gold to a record high last week.
(Additional reporting by Masayuki Kitano, Chikafumi Hodo in
TOKYO and Baker Li in Taipei; Editing by Neil Fullick)
