Tokyo: Asian shares rose yesterday, with South Korean stocks hitting a 21-month high, as upbeat US manufacturing data and jobless claims boosted hopes for a sustainable economic recovery.
The dollar edged up to a seven-month high against the yen above 94.06 yen.
But trade was light, with many investors in the region as well as in Europe and the United States away for the Good Friday holiday, and gains were limited by caution ahead of more US job data later in the day.
Japan's Nikkei average hit an 18-month peak for the fourth straight day, getting a boost from a rise in tech shares and automakers such as Honda Motor and Toyota Motor following a jump in US auto sales in March.
Shares of Japanese exporters drew additional support from the yen's fall this week to a seven-month low against the dollar, while expectations for stronger Japanese earnings — which kick off this week with retailers — buoyed the overall market.
But analysts said that signs of overheating could leave the market vulnerable to profit-taking should the US non-farm payroll report disappoint.
Caution
"There's quite a bit of caution about the US jobs data and given that the market's a bit overheated, it's really poised for profit-taking," said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.
"But many recent worrying factors overseas have been cleared up, such as Greece, and markets are responding favourably."
An index of US manufacturing activity in March rose to its highest level in over five years, the Institute for Supply Management said on Thursday, while a US Labour Department report showed initial weekly claims for jobless benefits fell more than expected.
Data later yesterday was expected to show US nonfarm payrolls grew for only the second time since the economy fell into recession in late 2007.
A good payroll number would bolster hopes that the world's largest economy has now recovered enough to grow on its own without massive government support.
The Nikkei closed up 0.4 per cent at 11,286.09, an 18-month closing high, and briefly rose to 11,313.98, just above a 38.2 per cent retracement of a sell-off from its 2007 peak to its 2008 trough.
Honda and Toyota each rose more than 1 per cent on news that US auto sales jumped to a seven-month high last month.
The MSCI's broad measure of shares in the Asia-Pacific excluding Japan edged up 0.1 per cent, paring gains after hitting its highest level in nearly three months at one point.
Gains pared
South Korea's KOSPI touched a high of 1,725.39, its loftiest level since late June 2008, as Hyundai Motor jumped 5.8 per cent and Samsung Electronics rose 1.4 per cent. The index later pared its gains to 0.3 per cent.
The yen has been hurt by market expectations that the Bank of Japan will hold off on raising interest rates for the next year or two in a bid to spur the stubbornly weak economy.
By contrast, US primary dealers see a better than even chance of the Federal Reserve raising interest rates late in 2010, a factor that has helped support the dollar this year.
Also weighing on the yen was talk that Japanese investors may move funds into higher-yielding currencies abroad for returns now that the new fiscal year has started.
"A recovery in the investment environment, given strong stocks and commodity prices and overall stability in financial markets, helps expectations for Japanese investors to show appetite for overseas assets," said Kazuyuki Kato, treasury department manager at Mizuho Trust & Banking.
Euro dips
The euro dipped 0.2 per cent against the dollar to $1.3514 and edged up 0.1 against the Swiss franc at 1.4313 francs.
On Thursday, the euro posted its biggest one-day rise against the franc in nine months amid talk of intervention by the Swiss National Bank. The Swiss central bank declined to comment on the franc's price action.
South Korea's foreign exchange authorities were spotted buying dollars to curb the won's strength yesterday. Japanese government bonds dipped as investors took profits following the previous day's rally.
June 10-year JGB futures rose 0.03 to 138.72 after posting their biggest one-day gain in four months the previous day, when JGB investors began Japan's new financial year by scooping up debt.
Ten-year US Treasuries rose around 2/32 in price with a yield around 3.872 per cent , down about a basis point from late US trade on Thursday and staying below a nine-month high of 3.92 per cent hit last week.
