* Dollar edges up on short-covering, still seen vulnerable
* South Korea drags down Asia stocks 0.3 pct
* Trade limited due to Japan, U.S. holidays
* Oil extends gains on global recovery hopes
By Eric Burroughs
HONG KONG, Oct 12 (Reuters) - The dollar edged further
away from 14-month lows on Monday as investors trimmed bets
against the beleaguered U.S. currency, while South Korean
stocks dragged down other Asian markets on worries
third-quarter earnings may not live up to expectations.
European shares were set for a positive start, with futures
on the Dow Jones Euro Stoxx 50 <STXEc1> up 0.8 percent.
Trading activity was limited due to a holiday in Japan and
with most U.S. financial markets closed later in the day for
Columbus Day.
South Korea's KOSPI led the decline among Asian markets and
shed 0.4 percent, hurt by heavyweights such as Samsung
Electronics <005930.KS> and steelmaking giant POSCO
<005490.KS>.
Some investors were starting to get nervous about the
third-quarter earnings season, especially as economic data out
of the United States in the past few weeks has suggested that
its rebound from a deep recession may be losing momentum.
"Shares are likely to be volatile for some time, as
investors increasingly want to confirm with their own eyes
whether economic data and results are in line with earlier
hyped-up expectations," said Hong Soon-pyo, a market analyst at
Daishin Securities in Seoul.
Quarterly results from major U.S. banks and companies this
week are seen as a key reality check for whether a seven-month
rally in stocks this year has more legs. Among those reporting
are Intel Corp <INTC.O> on Tuesday and JPMorgan Chase <JPM.N>
on Wednesday. []
"Cost cutting has been the main driver of second-quarter
earnings, but the main focus in Q3 is the ability to generate
revenue," said analysts at Calyon in a note to clients.
The MSCI index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> dipped 0.3 percent, with material and financial
shares among the biggest drags. But for the year, the index is
up about 62 percent.
The Thomson Reuters regional index <.TRXFLDAXPU> was also
down 0.3 percent.
Equity indexes were mixed across the region, with the MSCI
index for India <.MSCIIN> up nearly 1 percent and Singapore
<.MSCISG> rising 0.7 percent.
Shares of POSCO, the world's fourth-largest steelmaker,
dropped 0.7 percent before what is expected to be upbeat
earnings and guidance on Wednesday. According to data from
Thomson Reuters StarMine, POSCO is likely to post a positive
surprise in quarterly earnings compared with median estimates.
DOLLAR IN REPRIEVE
The dollar won a brief reprieve late last week from a
steady slide that has raised worries about the waning status of
the world's reserve currency and prompted some central banks in
Asia to intervene in foreign exchange markets to stem
corresponding gains in their own currencies.
The dollar index, a gauge of its performance against six
major currencies, edged up 0.1 percent to 76.496 <.DXY> after
falling as far as 75.767 last week. The dollar climbed 0.6
percent to 90.22 yen <JPY=>, while the euro shed 0.1 percent to
$1.4709 <EUR=>.
The greenback has been battered by investors shifting funds
out of safe-haven U.S. Treasuries and money markets and into
emerging market assets, and by worries that central banks are
cutting their share of foreign reserves held in dollars.
Thailand's central bank governor signalled on Monday that
it would intervene further to curb gains in the baht against
the dollar and said it was diversifying reserves after weeks of
such intervention <THB=>. []
South Korean government bonds dipped despite the drop in
stocks, giving up some of their big gains from Friday when the
Bank of Korea tried to tamp down expectations for an interest
rate increase as soon as next month.
Three-year KTB bond futures <KTBc1> dipped 0.01 point to
109.05, while one-year swap rates <KRWIRS> edged up a basis
point to 3.50 percent after dropping 11 basis points on Friday
-- the biggest one-day drop in nine months -- on the BOK's
shift in tone.
Gold edged up near last week's record but the dollar's
rebound as well as worries about falling jewellery demand in
main consumer India were likely to limit gains.
Spot gold <XAU=> was quoted at $1,049.45 an ounce, up $1.20
from New York's close and within striking distance of a
lifetime high of $1,061.20 an ounce hit last Thursday. Bullion
gained nearly 5 percent last week, its best weekly performance
in nearly half a year.
Oil futures <CLc1> rose about 1 percent and topped $72 a
barrel on growing optimism about the pace of the global
economic recovery and a positive demand forecast from the
International Energy Agency (IEA).
The IEA said world oil demand will recover at a faster pace
than previously expected for the rest of this year and next as
the economy picks up.
(Additional reporting by Jungyoun Park in Seoul)
(Editing by Kim Coghill)
