* Euro decline seen limited on rate differential story
* More gains for emerging Asian FX seen-PIMCO
* Gold hits another record, ETF holdings rise
By Saikat Chatterjee
HONG KONG, April 18 (Reuters) - The euro weakened on a broad
wave of profit-taking on Monday though could rebound later in
the day, while stocks in Asia ex-Japan remained flat, with
investors unconvinced that China's latest moves to cool its
economy would hurt the global recovery.
A raft of news about Europe's tenuous debt situation,
including Finland's anti-euro party making big gains in a
parliamentary election on Sunday and talk of a Greek debt
restructuring, gave cover to traders hoping to take profits
after the euro rose above $1.4500. []
"This probably mostly has to do with market sentiment. In
the end, I think what it probably boils down to is that there
are still some long positions in the euro," said Koji Fukaya,
director of global foreign exchange research for Credit Suisse
Securities in Tokyo, referring to the euro's drop.
But the common currency is expected to be supported by
prospects of another interest rate hike after the recent quarter
point increase, as data showed euro zone inflation climbed
higher than expected in March. []
In contrast, the Fed is expected to continue with its ultra
easy policy stance, encouraging investors to search for
high-yielding currencies, especially in Asia, where authorities
are still battling inflationary pressures.
China on Sunday raised banks' reserve requirements for the
fourth time this year. The move was not a surprise as market
players had predicted more tightening after last week's data
showed an acceleration in inflation. [].
Beijing's latest policy action is a sign that authorities
across the region are intensifying their battle, using interest
rate increases and strengthening currencies, to rein in imported
inflation due to rising commodity prices.
Singapore sanctioned an increase in the value of its
currency last week while the Bank of Thailand is likely to raise
interest rates at a review on Wednesday.
In a sign that Beijing's latest action was well anticipated,
both Chinese and Hong Kong stocks were trading
higher on the day after opening lower.
GOOD PERFORMER
Shanghai has been the best performing stock market so far
this year with gains of about 9 percent as authorities have
repeatedly raised reserve requirements and increased rates. In
contrast, India's troubles in tackling inflation have
seen that market decline by 4.5 percent on a year-to-date
basis.
Elsewhere, Japan's Nikkei dipped, weighed by
declines in telecommunications shares. Outside Japan, MSCI's
index of Asia Pacific shares remained mostly
flat. Korean shares hit another record high before
ending lower.
With stronger currencies being used as a weapon to tackle
inflation, investors are adding exposure to the Chinese yuan
and the Singapore dollar and have turned bullish
on the South Korean won's outlook .
PIMCO, the world's biggest bond fund manager, said the yuan
and the won are "fundamentally undervalued". []
GOLD HITS FRESH RECORD
In commodities, gold rose to yet another record high,
building on four consecutive weeks of gains, powered by rising
inflation pressures and a weakening dollar. Holdings in the SPDR
Gold Trust , the world's largest gold-backed
exchange-traded fund, rose too. []
London copper prices dropped half a percent while
Shanghai copper prices <SCFcv1> also dipped slightly after
Beijing's latest round of tightening before drifting higher.
"LME prices are basically still in their rangebound trading
pattern and that will continue this week," said Judy Zhu, a
commodity analyst at Standard Chartered Bank.
U.S. crude futures <CLc1> slipped below $109 a barrel as
traders took profits after three days of gains despite a crude
oil production cut by Saudi Arabia. Prices have retreated
slightly after hitting a 2-1/2 year peak of $113.46 earlier this
month. []
Notwithstanding the commodities rally, U.S.
Treasury yields declined as recent data showed underlying U.S.
inflation pressures remained subdued. Ten-year yields
edged a basis point lower to 3.40 percent after
falling 9 basis points on Friday.
(Additional reporting by Masayuki Kitano and Jongwoo Cheon in
SINGAPORE and Ian Chua in SYDNEY; Editing by Richard Borsuk)
