Asian shares eased on Thursday on renewed concerns about Chinese growth, but a brighter global economic outlook underpinned the dollar and kept investor risk appetite intact, reducing the appeal of safe-haven government debts.
The dollar touched a fresh 11-month high against the yen above 84 yen and hit a two-month high against a basket of major currencies above 80.700. The U.S. currency also rose to a one-month high against the euro of $1.3004 (8309 pence).
U.S. Treasury yields jumped to five-month highs, dragging up Japanese benchmark yields to three-month peaks on Thursday.
The MSCI Asia Pacific ex-Japan index <.MIAPJ0000PUS> eased 0.4 percent, led by falls in the materials sector <.MIAPJMT00PUS> and resource-reliant Australian shares. But Japan's Nikkei <.N225> rose 0.4 percent as a weaker yen boosted exporters, lifting the index to an eight-month high earlier.
The market is reviewing its view on the U.S. economy and scaling back expectations for further U.S. monetary easing or the risk that the U.S. economy will be doing poorly this year, Makoto Noji, senior strategist at SMBC Nikko Securities.
The dire fiscal situation in Europe remains unchanged, keeping intact the prospect that global growth would only be modest this year, he said.
A firmer dollar hurt dollar-based commodities such as gold, as well as industrial metals, including copper. Copper weighed by concerns about demand from China, the world's largest consumer of the metal, fell 0.4 percent to $8,430 a tonne.
Premier Wen Jiabao said on Wednesday China must embrace slower growth and bolder political reform to keep its economy from faltering. He also dampened hopes for any near-term easing measures in the country's property sector, sending Chinese shares lower.
Chinese shares remained weak on Thursday, after falling sharply the day before on Wen's comments.
Euro zone multimedia coverage: http://r.reuters.com/xyt94s
Fed hawks vs doves: http://link.reuters.com/ryv97p
Yields for US, UK, Germany: http://link.reuters.com/buc27s
DOLLAR RETAINS MOMENTUM
U.S. stocks were choppy on Wednesday after hitting multi-year highs earlier in the week, while stocks in Europe closed at a near 8-month high.
The U.S. recovery is starting to gain some traction, said Annette Beacher, head of Asia Pacific research at TD Securities in Singapore.
In a sign investors are shifting into riskier assets, gold fell more than 2 percent on Wednesday, a second straight decline, and stood barely changed at $1,642 an ounce on Thursday.
It has shed about 5 percent or $80 per ounce over the past two days, erasing the premium it enjoyed based on expectations of further U.S. monetary easing to stimulate the economy.
Another major safe-haven asset, U.S. Treasuries, also came under selling pressure, pushing the benchmark 10-year yield up further in Asia on Thursday to its highest since October at 2.30 percent.
That in turn drove 10-year Japanese government bond yields up 4.5 basis points to a three-month high of 1.050 percent on Thursday.
Asian credit markets were steady, with the spread on the iTraxx Asia ex-Japan investment-grade index narrowing by 1 basis point from Wednesday.
Reflecting easing caution over investing abroad, Japanese investors bought a net 367.1 billion of foreign bonds in the week through March 10, finance ministry data showed on Thursday, following up their purchases in previous weeks. Foreign investors continued net buying of Japanese stocks for an 11th straight week.
Global investors sought high yields again last week, with EPFR Global-tracked High Yield Bond Funds seeing year-to-date inflows nearing almost three times that of the full year total for 2011 last week.
Brent April crude fell 0.2 percent to $124.68 a barrel, while U.S. April crude futures edged up 0.2 percent to $105.66 a barrel on Thursday, after falling 1.2 percent to settle at $105.43.
Energy prices lifted consumer prices in the euro zone in February but industrial production showed factories expanded by 0.2 percent across the bloc in January, ending two consecutive monthly falls and pointing to the euro zone's eventual recovery from recession later this year.
(Additional reporting by Cecile Lefort in Sydney and Hideyuki Sano in Tokyo; Editing by Michael Perry)