Dollar near 10-month peak on Fed remarks; Asian shares mixed

By Masayuki Kitano

SINGAPORE (Reuters) - The dollar held firm near a 10-month high versus a basket of currencies on Friday after a regional Federal Reserve chief said the U.S. central bank may begin to taper its asset buying this summer, while Asian shares were mixed.

European stock index futures pointed to a lower open on Friday. At 0604 GMT, futures for Euro STOXX 50, Germany's DAX and France's CAC were 0.1 to 0.4 percent lower.

U.S. equities had sagged on Thursday after John Williams, president of the Federal Reserve Bank of San Francisco, said the Fed could begin easing back on the monetary gas pedal this summer and end bond buying late this year.

Although Williams does not have a vote in the Fed's policy-setting panel this year, his comments had weighed on shares, since the Fed's purchases of $85 billion a month in bonds has been a significant driver of the rally in equities that has taken U.S. stock indexes to record highs this year.

His comments helped give a boost to the dollar. The dollar index, which measures the dollar's value against a basket of currencies, rose 0.4 percent to 83.942, nearing a 10-month high of 84.094 set earlier this week.

The dollar's strength will probably become more prominent later this year, said Sim Moh Siong, FX strategist for Bank of Singapore.

"What we're seeing right now is more of a rehearsal. It's likely to pan out on a more sustained basis by late this year," he said.

"Eventually I think the broad tone of data should show that the U.S. economy is holding up much better than the rest of the world and that would lend more durable support for the U.S. dollar," he said.

The dollar is likely to gain support particularly against other low-yielding currencies such as the euro, the yen, sterling and the Swiss franc, he added.

In the stock market, MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.3 percent to 479.57, inching away from last week's high of 491.17, its strongest level since July 2011.

Some individual Asian stock markets pushed higher, however. Mainland Chinese shares rose 1.1 percent, while Japan's Nikkei share average gained 0.7 percent despite some caution over its steep recent gains.

The Nikkei has jumped more than 45 percent this year, helped by the Bank of Japan's aggressive monetary stimulus and the yen's weakness, which is positive for Japanese exporters.

Singapore's Straits Time Index touched its highest level since January 2008 earlier on Friday. The main index in the Philippines fell 0.7 percent, down for a second straight day after having set a record closing high on Wednesday.

Markets in South Korea and Hong Kong were closed on Friday for public holidays.

U.S. crude futures held steady at $95.20 a barrel. Spot gold stood at about $1,385 an ounce, staying above a four-week low near $1,369 set on Thursday.