Asia follows Wall St. higher, euro probes lows

By Shinichi Saoshiro

TOKYO Wed Jul 16, 2014 9:54pm EDT

(Reuters) – Asian equities gained early on Thursday, lifted by another record-high close on Wall Street, while the euro probed recent lows against the dollar amid market speculation the U.S. Federal Reserve is tilting toward tighter monetary policy.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.15 percent.

Tokyo’s Nikkei gained 0.3 percent.

The Dow closed at a record high overnight, boosted by merger news and strong earnings from blue chips such as Intel Corp.

The dollar was higher against some peers following disappointing economic reports in Europe and comments by Federal Reserve Chair Janet Yellen before this week that suggested rate hikes may come sooner than expected.

The dollar traded little changed at 101.65 yen having gained about 0.4 percent so far this week against the Japanese unit.

The euro stood at $1.3527, not far from a one-month low of $1.3520 hit the previous day.

In focus was whether the euro could hold above the $1.35 threshold, which if breached would take the single currency to a five-month trough.

Kathy Lien, managing director at BK Asset Management, said it was important to recognize fundamental reasons the euro refused to break $1.35, such as U.S. yields in a downtrend, a massive current account surplus, and benefits from the diversification of currency reserves.

“Therefore without a significant rally in U.S. yields or a strong signal from the ECB that further easing is imminent, a move below $1.35 could be fake-out instead of a breakout,” she wrote in a note to clients.

U.S. Treasury yields, seen as central to the dollar’s appeal in currency markets, were initially higher on Wednesday but later slipped.

In commodities, U.S. crude oil extended gains after rising more than $1 the previous day after government data showed a sharp fall in U.S. crude stocks last week.

U.S. crude was up 0.2 percent at $101.39 a barrel.

(Editing by Eric Meijer)