Asian shares pull back, dollar gains respite

HONG KONG (Reuters) – Asian stocks retreated from 13-month highs on Friday and commodity prices dipped after data giving a conflicting picture about the strength of the U.S. recovery stopped investors from extending this week's rally.

The Bank of Japan deputy governor, Hirohide Yamaguchi, said a positive business cycle was starting and signaled the central bank could soon withdraw emergency support for corporate funding.

But Japanese stocks fell as investors sold shares of exporters that had run-up sharply while there was also wariness about taking new positions ahead of public holidays early next week. The Nikkei index (.N225) was down 1.2 percent, breaking a three-day rally.

The dollar benefited as investors globally became more cautious. It held above one-year lows reached on Thursday against a basket of currencies (.DXY), although analysts said its respite could be temporary.

"We are seeing a bit of a pullback but the broader U.S. dollar weakness remains intact as it turns to be the currency for carry trades," said Jonathan Cavenagh, currency strategist at Westpac in Australia.

Investors across the region stood back after Asian equities hit their highest level in 13 months on Thursday. While there is growing confidence the global economy is on an uptrend there is uncertainty about the strength of that recovery, analysts said.

Data on Thursday showed U.S. housing starts hit their highest level last month since November, but a rise in the number of Americans drawing long-term unemployment compensation tempered optimism for a sharp rebound in the world's biggest economy, and the Dow Jones (.DJI) slipped 0.08 percent.

The MSCI index of Asia Pacific stocks traded outside Japan was down 0.7 percent on Friday morning, after surging 80 percent since mid-March.

QANTAS BUCKS MARKET

Japanese government bond futures rebounded as Tokyo stocks fell, but gains were limited ahead of the long holiday. December 10-year JGB futures rose 0.10 point to 138.69.

Gold was holding up, trading at $1,011.95 an ounce, close to its New York close at $1,011.45 after hitting an 18-month high of $1,023.85 on Thursday. Seen as a hedge against potential inflation, gold is likely to stay firm and many market participants still expect it to break through its record high of $1,030.80.

Otherwise, commodity (.CRB) prices slipped on uncertainty about the strength of the global economic recovery and the oil price edged down 47 cents to $72 a barrel.

Weaker commodity markets put pressure on shares of Australian resources companies, such as mining giant BHP Billiton (BHP.AX) which fell 2.4 percent, and helped push the Aussie dollar below Thursday's one-year high.

However, shares in Qantas Airways (QAN.AX) bucked the market, jumping 3.4 percent after positive comments on the carrier from broker RBS.

Shares across Greater China were slightly weaker on concern that recent gains may be overdone.

In Taiwan, the world's top contract chip maker TSMC (2330.TW), and rival UMC (2303.TW), came under pressure after the island's new cabinet said it would continue to restrict investments by the chip foundry sector in China.

TSMC dipped 0.3 percent while UMC fell 1.3 percent.