Asian stocks rise, dollar struggles after downbeat U.S. data

By Lisa Twaronite

TOKYO (Reuters) - Asian shares mostly rose on Friday while the U.S. dollar struggled to regain traction after downbeat U.S. economic data pushed it to a nearly three-week low against the euro.

MSCI's broadest index of Asia-Pacific shares outside Japan added about 0.7 percent, on track for its biggest weekly gain since September.

But Japan's Nikkei stock average erased an initial bounce and tumbled 1.5 percent, down for the sixth straight week, as the yen pushed higher.

"Japanese stocks have trouble advancing as overseas investors have become reticent," said Kenichi Hirano, a strategist at Tachibana Securities in Tokyo.

Markets in mainland China and Hong Kong also crept higher, set for their biggest weekly gains since September, recovering from the recent rout from emerging markets despite mixed signals from Chinese inflation data.

China's consumer inflation remained at a seven-month low in January while factory gate prices fell for a 23rd consecutive month, broadly in line with market expectations and consistent with other recent data showing economic weakness.

This gave investors no reason to expect any change to the central bank's monetary policy stance, though it also suggested the economy continues to face headwinds.

"This is a dead cat bounce," said Hong Hao, Bank of Communications International's chief equity strategist. "Everybody's looking for a trade with the selloff, but inconsistent China data does not seem to point to any meaningful improvement."

On Wall Street on Thursday, investors managed to shrug off the dour U.S. economic data. The Dow Jones industrial average, the S&P 500 and the Nasdaq Composite all marked gains, despite a storm that battered many eastern states.

U.S. retail sales fell unexpectedly in January, while separate data showed more claims for jobless benefits last week, against a backdrop of unusually bad weather.

DOLLAR SOFTENS

The dollar softened on the reports, which helped point Asian emerging markets currencies towards weekly gains. The Indonesian rupiah hit a near 11-week high on Friday, after data showed that country's current account deficit narrowed sharply in the fourth quarter.

The yield on benchmark 10-year Treasury notes stood at 2.717 percent in Asian trade, compared with Thursday's U.S. close of 2.736 percent.

Yields have rallied this week after the U.S. Congress approved an increase in the debt limit and incoming Federal Reserve Chair Janet Yellen maintained the central bank's commitment to gradually withdraw its stimulus.

Against the yen, the greenback's early gains unravelled, and it slumped about 0.4 percent on the day to 101.72 yen, moving away from Thursday's session high of 102.58 yen.

The dollar index slumped about 0.1 percent to 80.228, though it remained above Thursday's low of 80.194, a level last seen on January 24.

The euro was holding steady at $1.3679, not far from the previous session's high of $1.3692, which was its highest since January 27.

The common currency had a muted reaction to news that Italian prime minister will resign on Friday, opening the way for the country's third administration in a year.

Investors awaited fourth-quarter growth data out of the euro zone later on Friday. Analysts polled by Reuters expect slightly faster growth in the 17-nation economy.

In commodities trading, U.S. crude slipped about 0.2 percent to $100.14 a barrel after skidding on the previous session's dismal U.S. data. Brent crude also edged down about 0.1 percent to $108.41.

Spot gold added about 0.2 percent in Asian trading to $1,304.86 an ounce, after hitting a three-month high of $1,307.20 earlier in the session.

The U.S. data gave gold futures a lift and helped them post their eighth straight gaining session - the longest winning streak since July 2011.

(Additional reporting by Clement Tan in Hong Kong; Editing by Eric Meijer and Chris Gallagher)