Asian shares fall, while Japan's gain as brakes applied to strong yen

By Nichola Saminather and Hideyuki Sano

SINGAPORE/TOKYO (Reuters) - Most Asian shares fell to three-week lows on Friday, but Japan bucked the trend after its finance minister pledged to guard against strong moves in the yen in either direction.

While that led to a slight retreat in the yen from a 17-month high against the dollar, the Japanese currency is still headed for weekly gains against its major counterparts.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.2 percent, heading for a weekly drop of 1.5 percent.

European equities look set to fare better, with financial spreadbetters expecting Britain's FTSE 100 to open about 0.4 percent higher, Germany's DAX to rise 0.7 percent, and France's CAC 40 to gain 0.1 percent.

Japan's Nikkei erased earlier losses after Finance Minister Taro Aso said the government would take steps to counter "one-sided" moves in the yen in either direction.

The yen's strength is regarded as negative for Japan's big exporting firms, and after earlier falling to near-two-month lows ion strong yen buying, the Nikkei rose 1.2 percent, leaving it with losses of 1.4 percent for the week.

"Not only is (the yen's rise) bad for Japanese growth but it can also be seen as a negative sign for the global economy to the extent that it may signal unwinding carry trades and hence less risk taking in capital flows," Shane Oliver, head of investment strategy at AMP Capital in Sydney, wrote in a note.

On the other hand, "the higher the yen goes the greater the pressure on the Bank of Japan to undertake more monetary stimulus."

The yen slipped to 108.83, leaving it set for a weekly gain of 2.5 percent, having strengthened to 107.67 to the dollar on Thursday, its highest since October 2014.

CHINA DATA LOOMS

The dollar index, which tracks the greenback against a basket of six major currencies, was up about 0.1 percent at 94.60, poised for a flat weekly performance.

The euro last fetched $1.1363, and was set to end the week up 0.2 percent, having hit a six-month high of $1.1454 on Thursday.

On the other hand, commodity-linked currencies and many emerging economy currencies stepped back from recent multi-month highs as a risk-averse mood took hold on investors.

The Australian dollar traded at $0.7541, having fallen 1.3 percent on Thursday.

Chinese stocks also retreated ahead of a slew of economic data for March due over the next week, including money supply, new lending and inflation.

The Shanghai Composite index slid 0.7 percent, and was poised for a similar drop for the week. The CSI 300 was down 0.6 percent, and set for a 1 percent weekly decline. Hong Kong's Hang Seng slipped 0.4 percent, and was headed for a 1.5-percent loss for the week.

Bank shares led losses in Europe and the U.S. markets on Thursday, amid talk of more layoffs and cutbacks planned by Europe's major lenders as they struggle with zero rates.

The U.S. S&P 500 Index lost 1.2 percent, with financial shares falling 1.9 percent. In Europe, the FTSEurofirst 300 closed down 0.8 percent, hurt by a drop of more than 2 percent in financials.

The 10-year U.S. Treasuries yield was last trading at 1.7132, having fallen to a six-week low of 1.685 percent on Thursday.

U.S. interest rate futures maintained their firmness, pricing in a less than 20 percent chance of a rate hike in June.

Federal Reserve Chair Janet Yellen, in a conversation with former Fed chairmen on Thursday, said the U.S. economy is on a solid course and still on track to warrant further interest rate hikes.

In the commodities market, copper last traded at $4,666 a tonne, having suffered its biggest fall in more than six months on Thursday, when it slumped 2.8 percent to a six-week low of $4,631 a tonne.

China may be about to shock the global copper market by unleashing some of its stockpiles of the metal, which are near record highs, on to the global market.

Oil prices rose on Friday after firm economic indicators from the U.S. and Germany implied support for fuel demand, but analysts warned another downturn could be on the way due to ongoing oversupply.

Global benchmark Brent crude futures climbed 1.7 percent to $40.10 per barrel, and was set for an increase of 3.7 percent on the week. U.S. crude advanced 2.2 percent to $38.08, on track for a 3.5 percent weekly gain.

(Reporting by Hideyuki Sano and Nichola Saminather; Editing by Eric Meijer and Simon Cameron-Moore)