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Asia stocks fall while dollar crawls up, oil near 8-week high

by August 19, 2016 General

By Nichola Saminather and Shinichi Saoshiro

SINGAPORE/TOKYO (Reuters) – Asian stocks retreated on Friday as traders took profits from shares close to one-year highs, while the dollar edged up from a near eight-week low after some Federal Reserve officials reiterated the case for raising interest rates in coming months.

European stocks looked set for a similar soggy start, with spreadbetters expecting Britain’s FTSE 100 and Germany’s DAX to open 0.2 percent lower, and France’s CAC 40 to be down 0.3 percent.

MSCI’s broadest index of Asia-Pacific shares outside Japan pulled back 0.5 percent.

That would put it on track to end the week, during which it hit a 1-year high, 0.3 percent lower.

Japan’s Nikkei swung between gains and losses, but settled up 0.4 percent at the close, down 2.2 percent for the week.

South Korea’s Kospi was flat, on track for a 0.3 percent weekly gain. Australian shares closed 0.3 percent higher, recording a 0.1 percent decline for the week.

China’s CSI 300 index and the Shanghai Composite slid about 0.4 percent, but were still up 1.7 percent and 1.4 percent for the week, respectively, on hopes the government will roll out more stimulus to meet economic growth targets.

U.S. stocks eked out gains on Thursday following upbeat earnings and forecasts from Wal-Mart and as higher oil lifted energy shares.

Markets have been left confused by mixed messages from the Fed, with hawkish comments from New York Fed President William Dudley and San Francisco Fed President John Williams clashing with the Fed’s July meeting minutes this week saying more data is needed before interest rates can rise.

Investors are awaiting an annual meeting of central bankers from around the world in Jackson Hole, Wyoming, next week, in which Fed Chair Janet yellen is likely to cement expectations for a slow pace of rate increases.

“We might be seeing some profit taking in action,” said Bernard Aw, market strategist at IG in Singapore.

“Investors would also want to wait for next Friday when Yellen will be speaking, hoping she may at least provide some clarity on the Fed’s view, given a confusing minutes report.”

The dollar recovered on Friday following Williams’ and Dudley’s comments overnight, after falling to the lowest level since June 24 in response to the July minutes.

Dudley, who said earlier this week that the central bank could possibly hike rates in September, reinforced his hawkish message on Thursday.

Williams also signaled support for an interest rate hike in the coming months, warning that waiting too long could see the economy overheat. Williams does not have a vote on Fed policy this year, but his views are seen as influential due to his longstanding relationship with Yellen.

The dollar index, which tracks the greenback against a basket of six peers, rose 0.2 percent to 94.336. It is down 1.5 percent for the week.

The U.S. currency gained 0.3 percent to 100.21 yen. It is still on track to lose 1 percent on the week.

The euro slipped 0.2 percent to $1.13345 after touching $1.1366 overnight, its highest since June 24. The common currency is headed for a gain of 1.6 percent this week.

Oil prices have surged this week on expectations of revived talks by key exporters to freeze output levels.

Global benchmark Brent crude touched an eight-week high of $51.14 on Friday, and was last trading up 0.3 percent at $51.06. That followed a gain of 2.1 percent on Thursday. It is poised to add 8.7 percent for the week.

U.S. crude, which rose as much as 3.4 percent on Thursday, set a fresh six-week high of $48.65. It was last up 0.7 percent at $48.61 a barrel.

Both benchmarks have risen more than 20 percent from a lowin early August, putting oil in a technical bull market.

(Reporting by Nichola Saminather and Shinichi Saoshiro; Editing by Shri Navaratnam and Kim Coghill)