By Chikako Mogi
TOKYO, Feb 6 (Reuters) - Asian shares recovered on Wednesday
as solid euro zone data calmed nerves jarred by potential
political turmoil derailing the region's efforts to resolve its
debt crisis, while the prospect of a dovish new governor for the
Bank of Japan weakened the yen.
The MSCI's broadest index of Asia-Pacific shares outside
Japan inched up 0.3 percent after falling 0.8
percent the day before.
As prices approached their highs, trade became choppy as
investors sought to book profits, but analysts and traders say
any dip was likely to be seen as a chance to buy back into the
market. The pan-Asian index scaled a 18-month high on Monday.
Australian shares jumped 0.8 percent and South
Korean shares opened up 0.3 percent after slipping for a
fourth straight day to a two-month closing low on Tuesday.
Data showed on Tuesday the vast U.S. services sector
extended a three-year expansion in January, while business
activity in the euro zone, Markit's euro zone composite PMI,
climbed to a 10-month high in January.
The Standard & Poor's 500 Index and the Nasdaq
Composite Index gained over 1 percent, recouping most of
their losses after a sharp sell-off the previous session.
Japan's benchmark Nikkei stock average opened up 1.7
percent after closing down 1.9 percent to snap a five-day
winning streak the day before. Nikkei hit a 33-month high on
Yen selling resumed after Bank of Japan Governor Masaaki
Shirakawa said he would step down on March 19, three weeks
earlier than the official end of his five-year term, leaving at
the same time as his two deputies, and raising the prospect that
the next BOJ governor will more readily adopt the expansionist
monetary policy demanded by Prime Minister Shinzo Abe.
'The Bank of Japan is about to get a lot more dovish, and
sooner than previously thought,' said Christopher Vecchio, a
currency analyst at DailyFX.
Early on Wednesday, the dollar touched 93.79 yen to
its highest since May 2010, while the euro also rose
to 127.43 yen, its loftiest since April 2010. The Aussie reached
a 4-1/2 year peak around 97.42 yen. The pound touched
a 3-year high near 147.25 yen.
The euro drew support from growing confidence in the
region's economy and improving funding conditions for
deeply-indebted euro zone members.
News the European Central Bank's balance sheet fell to an
11-month low of 2.8 trillion euros ($3.8 trillion) as markets
unwound some of the ECB's crisis funding measures underpinned
the euro, coming as it does in stark contrast to the U.S.
Federal Reserve and the BOJ which keep expanding asset buying.
'Flows matter more than stock in currency markets when
comparing central bank balance sheets...highlighting the euro's
outperformance over the last few months,' said Ashraf Laidi,
chief global strategist at City Index, in a note to clients.
The euro was steady at $1.3578, still below Friday's
14-1/2-month peak of $1.3711, but above a key technical support
of its 14-day moving average at $1.34653.
The ECB is expected to keep interest rates unchanged at its
policy meeting on Thursday, but its president may face a
grilling over an Italian banking scandal.
Spanish and Italian yields fell on Tuesday after jumping on
worries over a corruption scandal in Spain and polls showing
Italy's former prime minister Silvio Berlusconi regaining ground
before elections this month.
Brent crude hit a 20-week high on Tuesday on
heightening demand prospects after positive economic data and
strong corporate earnings reports. U.S. crude was barely
changed at $96.65 a barrel.
($1 = 0.7392 euros)
(Additional reporting by Ian Chua in Sydney; Editing by Eric
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