U.S. Treasury yields subside, take dollar off 13-1/2 year peak, Asian stocks steady

By Shinichi Saoshiro

TOKYO (Reuters) - U.S. Treasury yields eased in Asian trade on Thursday as a week-long surge that followed Donanld Trump's shock election win subsided further, helping Asian stocks gain and dragging the dollar off a more than 13-1/2 year peak set overnight.

Japanese government bond yields also pulled back from multi-month highs after the Bank of Japan conducted a special fixed-rate bond buying operation for the first time, firing a warning shot against excessive yield moves.

The dollar index, which measures the greenback's strength against a basket of major currencies, stood at 100.270 after climbing to 100.570 overnight, its highest since April 2003.

The dollar has soared since Trump was elected president last week, as investors eyed the prospect of U.S. interest rates rising faster than previously expected due to his plans for an expansionary fiscal policy that would stoke inflation.

But the rout in U.S. bond prices began to slow, with the benchmark 10-year Treasury note yield pulling back to 2.197 percent in Asian trade after touching an 11-month high above 2.3 percent earlier in the week.

"The Trump-related move in fixed income has been very strong while information flow about the path of economic policy has not been. It's perhaps not surprising then that the rates market took a breather," wrote Sharon Zollner, senior economist at ANZ.

"The price action in fixed income suggests that the market has moved sufficiently for the time being, which raises the possibility that the dollar's rise may be due for a period of consolidation."

Global debt markets, at the mercy of surging U.S. yields until earlier in the week, began to regain some calm.

The German 10-year bund yield rose to a 10-month high near 0.400 percent on Monday but has since pulled back to 0.300 percent, while British 10-year gilts have also edged away from five-month highs near 1.500 percent seen earlier in the week.

Japan's 10-year yield stood flat at 0.015 percent after rising to a nine-month high of 0.035 percent on Wednesday. It was knocked back after the BOJ offered to buy an unlimited amount of JGBs of certain maturities in a special operation.

BOJ Governor Haruhiko Kuroda said on Thursday he does not have to accept gains in JGB yields simply because U.S. Treasury yields are rising.

The Japanese central bank announced in September that it will aim to keep the benchmark yield pinned around zero percent.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2 percent. It was still down 1 percent on the week as the prospect of higher U.S. interest rates pulled money away from emerging markets.

Japan's Nikkei rose 0.1 percent and Australian stocks climbed 0.2 percent. South Korea's Kospi added 0.1 percent while Shanghai lost 0.3 percent.

In currencies, the dollar edged back towards a five-month high of 109.760 reached overnight following the BOJ's operation, and stood at 109.170 yen.

The euro added 0.1 percent from Wednesday to stand at $1.0698 after setting an 11-month low of $1.0666 overnight.

Crude oil prices eased a bigger-than-expected U.S. crude inventory build outweighed hopes for a producers' freeze on output following Russia's comments about a possible meeting with Saudi Arabia.

U.S. crude was down 0.1 percent at $45.53 a barrel.

Gold nudged up slightly as the dollar consolidated. Spot gold inched up 0.2 percent to $1,226.54 an ounce, moving further away from the five-month low of $1,211.08 set on Monday.

Gold had still lost roughly $100 an ounce from last Wednesday's post-U.S. election high on the back of the sharp rise in bond yields and burgeoning appetite for risk.

(Reporting by Shinichi Saoshiro; Editing by Simon Cameron-Moore)