* Asian shares edge higher, ending 3-day losing streak
* Bonds gain; 10-yr JGB yield hits lowest since July 2005
* Oil steadies a day after falling to below $39 a barrel
By Rafael Nam
HONG KONG, Dec 24 (Reuters) - The dollar fell against the
yen on Wednesday as weak U.S. housing data signalled a
prolonged recession for the world's top economy, while Asian
stocks edged up, but without much conviction, ahead of the
Christmas break.
Despite tentative signs that the worst sell-off in global
markets may be running its course, investors are still holding
on to safe-haven government bonds in a sign of the caution that
prevails. Yields for Japan's 10-year government bond, for
example, on Wednesday hit their lowest since July 2005.
Oil prices steadied a day after extending a recent slump to
below $39 a barrel amid the economic gloom. European shares
were set to edge lower in thin trading.
"A tug of war in a limited range is continuing as
expectations for a year-end or January rally have abated to a
great extent," said Kim Hyoung-ryoul, an analyst at NH
Investment & Securities in Seoul.
The global economy will enter 2009 in a weak state, and
policy makers are responding with massive spending plans.
Japan's cabinet on Wednesday approved a record budget, while a
stimulus package in the United States appeared increasingly
likely in the incoming Barack Obama administration. []
Whether the combination of deep rate cuts, spending plans
and rescue measures can revive economic growth remains
uncertain. Some policymakers such as the European Central Bank
head argue that markets may not be appreciating the efforts
enough.
"There is an underestimation in the financial sphere of the
very great importance of the decisions that were taken," said
Jean-Claude Trichet on Tuesday, adding that banks were still
"very influenced" by mistrust that had set in from
mid-September.
Some evidence is also building that Asian financial markets
are mounting a gradual recovery, as shown by waning volatility
and technical factors among other signs. []
For the moment, though, the economic data remains
overwhelmingly weak.
The U.S. dollar slipped against the yen, hit in part by
data on Tuesday showing sales of existing U.S. homes fell by a
record amount last month, in an indication that the year-long
recession in the United States is picking up pace.
[]
The U.S. currency fell 0.7 percent from late U.S. trade to
90.36 yen <JPY=>. Near-zero U.S. interest rates and increased
demand for foreign assets are among the factors that have
forced the dollar to give up some of the gains seen earlier in
the year.
But the euro rose 0.4 percent against the dollar to $1.3968
<EUR=> as Trichet's comments were seen as a signal the ECB may
be more cautious about cutting interest rates, now at 2.5
percent.
Emerging market currencies were largely range-bound,
though
the South Korean won <KRW=> jumped more than 2 percent to end
at 1,306.3/7.3 from Tuesday's domestic close <KRW=KFTC> of
1,338.0 on suspected intervention by the domestic authorities.
SHARES EDGE HIGHER
Asian shares edged higher, heading for their first winning
session in four, though analysts attributed the gains more to
picking up sold-off shares than solid conviction.
"We see much more of a wide-ranging but ultimately sideways
market and economy ahead," said Andrew Quinn, research strategy
coordinator at Patersons Securities in Australia.
The MSCI index of Asian-Pacific stocks outside Japan
<.MIAPJ0000PUS> edged up 0.3 percent as of 0620 GMT, after
slumping 5.7 percent over the previous three sessions.
The index is still on course to fall by more than half for
the year, the worst performance in its 20-year history.
Japan's Nikkei average <> slumped 2.4 percent,
returning from a holiday on Tuesday with sell-offs in
automakers after Toyota Motor Corp <7203.T> early this week
forecast its first-ever annual operating loss.
Australian shares <> gained 1.4 percent, while markets
in Taiwan <> and Singapore <.FTSTI> rose less than 1
percent each.
Other major indexes fell, however. South Korea's main KOSPI
<> index and Shanghai's benchmark index <> fell more
than 1 percent each, while Indian shares lost 0.9 percent.
Oil prices steadied in Asian trade after on Tuesday
extending a recent slump to below $39 a barrel on the back of
the gloomy economic data. Crude was flat at $38.98 per barrel.
However, regional bond prices gained as few are willing to
part with an asset class seen as a safe haven during times of
trouble.
The 10-year Japanese government bond yield fell 1 basis
point from Tuesday to 1.205 percent, after earlier hitting its
lowest yield since 2005 at 1.195 percent.
In the United States, 10-year Treasuries rose 12/32 in
price to yield 2.143 percent <US10YT=RR>, down 4 basis points
from late U.S. trade on Tuesday and hovering near a five-decade
low of 2.04 percent hit last week.
