* Nikkei falls 0.2 percent, MSCI Asia-Pacific ex-Japan up
0.4 percent
* Brent crude eases below $122 a barrel
* Yen extends decline, euro near 6-month high against dollar
* Copper up, gold above $1,450 after hitting record on
Tuesday
(Updates prices)
By Alex Richardson
SINGAPORE, April 6 (Reuters) - The yen fell as the Bank of
Japan began a meeting on Wednesday that may signal its readiness
to further loosen monetary policy to support the earthquake-hit
economy while Asian stocks were muted after an interest rate
rise in China.
Brent crude oil hovered below a two-and-a-half year high
struck amid war in Libya and unrest in the Middle East.
Gold sat just below its record as China's fourth rate rise
since October and oil prices fuelled concerns about inflation
that helped propel the yellow metal, which is traditionally a
hedge against rising prices as well as a safe haven investment.
Japan's Nikkei share average dipped 0.2 percent. A
weaker yen ought to be positive for Japan's heavyweight
exporters, but investors remain concerned about production
capacity knocked out by last month's devastating earthquake.
"The dollar going above 85 yen is a significant
breakthrough," said Hiroaki Osakabe, a fund manager at Chibagin
Asset Management. "But carmakers and other manufacturers have to
be able to produce at full capacity first to really feel
positive impact. That's why they're not surging on the news."
MSCI's index of Asia Pacific shares outside Japan
rose 0.4 percent, led by a 1 percent gain for
its tech sub-index . Shanghai stocks rose
0.4 percent. U.S. stocks ended flat on Tuesday.
Copper prices rose in London and Shanghai futures
jumped 1 percent <SCFcv1> after a two-day holiday.
Past Chinese rate rises have been seen as negative for
stocks and commodities on the worry that a slowing economy might
crimp China's growing demand for industrial raw materials,
manufacturing components and, increasingly, finished goods.
But the latest 25 basis point rise announced by Beijing on
Tuesday was viewed as just the latest step in a tightening cycle
which has been going on for some time and was expected to
continue.
"The market has become comfortable with tighter Chinese
policy," said a metals trader in Singapore.
"We were looking at three rate rises this year so it's not
unexpected and they also seem to be in the habit of announcing
these things during market holidays."
EURO STRONG, YEN EASES
The euro rose as far as 121.89 yen , its highest in
11 months. The Australian dollar topped 88 yen for
the first time since April last year and the dollar climbed to a
six-month high of 85.52 yen .
The yen has been on a downward trend since a rare joint
intervention by leading central banks to weaken it last month
revived interest in the yen "carry trade" -- a strategy of using
cheap yen loans to fund higher yielding investments.
The Bank of Japan is expected to keep policy on hold at its
two-day meeting starting on Wednesday, but signal its readiness
to embark on further easing as damage from a March 11 earthquake
threatens to tip the economy back into recession.
In contrast, there are strong expectations the European
Central Bank will bump its key policy rate up 25 basis points
from a record low 1 percent on Thursday to curb inflationary
pressures, with markets already pricing in more tightening later
in the year.
Against the dollar, the euro traded around $1.4255 ,
just shy of Monday's five-month high of $1.4268.
Minutes of last month's Federal Reserve policy-setting
meeting, released on Tuesday, showed the U.S. central bank
appeared intent to complete a $600 billion bond-buying plan and
to keep rates at exceptionally low levels for an extended
period. []
With both the Fed and BOJ keeping ultra-loose monetary
policy in place, investors have been using the yen and dollar as
funding currencies to buy higher yielding assets, a lot of which
has flowed into commodity currencies such as the Australian
dollar.
Brent crude <LCOc1> eased 0.3 percent to $121.80 a barrel,
having jumped to a two-and-a-half year high above $122 on
Tuesday. U.S. crude <CLc1> also weakened 0.3 percent to $108.06
a barrel.
Gold traded around $1,453.15 an ounce, after rising
as far as $1,456.85 on Tuesday.
Japanese government bond futures fell, hurt by a slide in
U.S. Treasuries, with June 10-year futures down 0.17 point at
139.10, while the benchmark 10-year yield rose 1 basis point to
1.28 percent.
