GLOBAL MARKETS-U.S. dollar at 6-mo high on falling commodities

                                
 * Gold drops below $800 and next targets $750
                                
 * Five of G7 economies are shrinking
                                
 * Weak currencies don't mean strong equities - HSBC
                                
 By Kevin Plumberg
                                
 HONG KONG, Aug 15 (Reuters) - The U.S. dollar rose to a
six-month high against the euro on Friday as gold prices
tumbled to a 2008 low and oil slipped, leading investors to
increase bets on easing inflation and slower global growth.
                                
 The euro tumbled below $1.48 <EUR=> to the lowest since
February, extending losses after data released on Thursday
showed the euro zone economy shrank in the second quarter for
the first time since records began being kept in 1995.
                                
 Five of the Group of Seven rich nations have experienced
economic contraction this year, underscoring the dollar's
relative attraction with growth still holding up in the world's
largest economy and dragging crude prices back below $114 a
barrel.
                                
 "A lot of investors who have been buying commodities, not
just on a global growth story but as a hedge against a weak
dollar, are unloading those commodities based on a much more
constrained global outlook and going back into the U.S.
dollar," said Tony Morriss, senior currency strategist with ANZ
Bank in Sydney.
                                
 U.S. light crude futures edged below $114 a barrel, with
investors feeling more confident that a ceasefire in
hostilities between Russia and Georgia would hold. Since
hitting an all-time high of $147.27 a month ago, oil has lost a
fifth of its value as deep-seated worries about slowing demand
from big consumers like China.
                                
 A 1.5 percent decline in gold prices to $793.95 an ounce
<XAU=> in the spot market caused a landslide in other metals
prices, with silver plunging 8.7 percent <XAG=>, on track for
the largest daily decline since March.
                                
 "We'll have some people targeting $750, but I think we
would need to see a continuation in that dollar strength to
give it sufficient momentum to head that way," said Darren
Heathcote of Investec Australia in Sydney.
                                
 WEAK CURRENCY=WEAK STOCKS?
                                
 Asian equity markets edged lower as sentiment continued to
struggle as investors factored in to what extent potential
recessions in Britain, Europe and Japan would hit corporate
Asia's bottom line.
                                
 Japan's Nikkei share average edged up 0.4 percent <.N225>
though it has remained in a relatively tight trading range for
the last month. Shares of exporters with brands well-known
overseas such as Canon Inc <7751.T> and Sony Corp <6758.T> were
among the biggest boosts to the index, especially with the U.S.
dollar showing sustained strength.
                                
 However, currency weakness has not had good track record of
foreshadowing stock market strength.
                                
 "History shows a strong and consistent correlation between
weak currencies and falling stock markets," said Garry Evans,
Asia-Pacific equity strategist with HSBC in Hong Kong.
                                
 "Weak currencies are a symptom of a deeper problem --
slowing economic growth, out-of-control inflation or structural
issues -- that reduce the attractiveness of equities," he said
in a research note.
                                
 Outside of Japan, stocks in the Asia-Pacific region slipped
0.3 percent, heading back toward a 17-month low plumbed on
Wednesday, according to an MSCI index <.MIAPJ0000PUS>.
                                
 Hong Kong's Hang Seng index <.HSI> was slightly lower, down
0.4 percent. Offshore oil producer CNOOC Ltd <0883.HK> was the
biggest drag.
                                
 The hallmark trade of the past year, betting on strength in
raw materials prices because of solid growth in developing
countries while selling off the unstable financial sector, has
been seriously tested in recent weeks as the U.S. dollar showed
sustained strength.
                                
 The currency and commodity component of that trade has
clearly shown signs of unraveling. Corn and wheat futures
traded on the Chicago Board of Trade fell sharply following the
move higher in the dollar.
                                
 The euro was down 0.1 percent to $1.4778 <EUR=>, after
having sunk to around $1.4750 earlier in the session.
                                
 The dollar was trading around 110.05 yen, up 0.3 percent
and just below a seven-month high hit earlier in the week.
                                
 Weakness in the metals markets knocked the Australian
dollar down 0.4 percent to US$0.8661 <AUD=>. Since mid July
when many commodity prices began to turn lower, the Australian
currency has dropped 12 percent.