GLOBAL MARKETS-Dollar holds line as Asia shares dip

                                
 * China says expect more two-way yuan movement
                                
 * Equities slightly lower ahead of earnings season
                                
 * Gold slightly slower but support seen
                                
 By David Fox
                                
 SINGAPORE, Oct 12 (Reuters) - Asian policy makers appeared
to see little mid-term respite for the dollar despite the
greenback holding firm on Tuesday against most of its
counterparts, while stocks also traded down ahead of the U.S.
corporate earnings season.
                                
 Asian authorities worried about currency appreciation have
moved to stem inflows of hot money that could also impact on
their exports following an IMF meeting at the weekend that did
little to reassure markets.
                                
 Most European bourses also opened down with Britain's FTSE
100 <.FTSE> off 0.4 percent, Germany's DAX <.GDAXI> down 0.9
pct and Europe's FTEUROFIRST 300 <.FTEU3> 0.4 percent lower.
                                
 China's State Administration of Foreign Exchange (SAFE) on
Tuesday urged market players to get used to two-way exchange
rate movements, saying that its policy of currency reform did
not necessarily equate to yuan appreciation. [ID:nTOE69B030]
                                
 But the country's foreign exchange regulator said investors
were still firm in their belief that the yuan would rise and
that this would help drive capital to China over the rest of
the year.
                                
 And Thai Finance Minister Korn Chatikavanij said the baht
was likely to rise further because of U.S. policy and the Thai
government would consider measures to curb any excessive
speculation in the currency. [ID:nTST000115]
                                
 Thailand's cabinet agreed to impose a 15 percent
withholding tax on capital gains and interest income from
foreign investment in government debt in a bid to brake the
baht, which has climbed to its highest level since the 1997
Asian financial crisis. [ID:nGE69B0A6]
                                
 Japan said it would wade into the foreign exchange market
anew if need be to weaken the yen, despite widespread
disapproval by its rich-country peers of a rare bout of dollar
buying last month. [ID:nTOE69B00D]
                                
 The China Securities Journal said in a front-page editorial
that Beijing would have to control the pace of yuan
appreciation and refrain from raising interest rates to ward
off inflows of speculative capital.
                                
 "The financial crisis could escalate into a currency
crisis," the newspaper said. "There will be no winner."
                                
 Asian shares were trading lower with indices consolidating
after recent gains amid caution ahead of the corporate earnings
season.
                                
 The dollar was up against most Asian currencies, although
some traders said short-term profit-taking was likely
responsible and further falls still possible. The dollar index
<.DXY> was up 0.26 percent at 77.640, still close to its lowest
in nearly nine months.
                                
 Around 0700 GMT, the Hang Seng <.HSI> was down 0.35 percent
at 23,126.35, Japan's Nikkei <.N225> was down 2.09 percent at
9,388.64, Korea Composite Stock Price Index <.KS11> was down
1.16 percent at 1,868.04 and Singapore's Straits Time Index
<.FTSTI> was down 0.22 percent at 3,156.60 points.
                                
 China bucked the trend with the key stock index <.SSEC>
reversing earlier losses to close up 1.3 percent on Tuesday,
its highest in five months.
                                
 TALK DOWN EXPECTATIONS
                                
 Chinese officials have repeatedly tried to talk down
expectations of a yuan appreciation since freeing the currency
from a 23-month peg to the dollar on June 19. But with the yuan
up nearly two percent against the dollar since late August,
concern is mounting that China could soon face a tide of hot
money.
                                
 (For a Reuters PDF on global currency disputes, click:
http://r.reuters.com/gez77p)
                                
"Currency reform does not equate to yuan appreciation. The
emphasis is more on the improvement of the currency formation
mechanism," SAFE said in a report about China's first-half
balance of payments.
                                
 In Tokyo, a day after the dollar fell to a new 15-year low
of 81.37 yen on ECB,  one trader said the market expected a
rate of between 81.50 and 83.00 ahead of a meeting of G20
finance chiefs in South Korea later this month.
                                
 Gold edged lower pressured by a stronger dollar, but
expectations of further monetary easing by the U.S. Federal
Reserve are likely to support the bullion bull run. Spot gold
<XAU=> inched down to $1,346.10 an ounce in early trading
reversing gains in the previous session.
                                
 At 0700 GMT, Asian stocks were down 1.46 percent with the
MSCI Asia ex-Japan index <.MIAPJ0000PUS> at 454.26.
                                
 China's central bank auctioned 22 billion yuan ($3.3
billion) of one-year bills in open-market operations on Tuesday
at a yield of 2.0929 percent, unchanged from the last sale and
in line with market expectations. [ID:nTST000508]
                                
 Traders had expected the People's Bank of China to keep the
one-year bill yield steady because of its reluctance to send
any market signals that it wants to lift benchmark interest
rates.
                                
 (Editing by Nick Macfie)
 (david.fox@thomsonreuters.com; +65 6870 3815; Reuters
Messaging: albert.yoon.reuters.com@reuters.net)
 (For the state of play of Asian stock markets please click on:
<0#.INDEXA>)
                                
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