* MSCI Asia ex-Japan gains 0.6 pct, Nikkei edges up 0.2 pct
* Short cover lifts euro up 0.6 pct, Aussie up 1 pct to
1-week high
* Dollar demand intensifying on Europe jitters
* Firmer euro supports gold
* European shares likely rise
By Chikako Mogi
TOKYO, May 28 (Reuters) – Asian shares and the euro edged up
from lows on Monday, as opinion polls showing a lead for
Greece’s pro-bailout camp helped calm fears of a disorderly exit
by Athens from the single currency that had driven a flight from
riskier assets last week.
The recovery looked vulnerable, however, as MSCI’s broadest
index of Asia-Pacific shares outside Japan rose
0.6 percent, still not far from its lowest level since late
December touched on Friday.
The pan-Asia stock index posted a third consecutive week of
losses last week for its longest losing streak in six months. It
has now wiped out all its gains for the year, having been up
some 15 percent from end-2011 levels in late February.
Japan’s Nikkei average edged up 0.2 percent, after
posting its longest weekly losing run in 20 years last week.
European shares looked set to track their Asian peers
higher, with spreadbetters predicting major European markets
would open up as much as 0.5 percent.
U.S. stock futures were up 0.8 percent.
“Today it really comes down to what is going on in Greece,
the idea that Greece will stay within the euro zone calms the
market,” said Ben Taylor, a trader at CMC markets.
Investors fled to the safety of the U.S. dollar last week on
mounting concerns about Greece and instability in the Spanish
banking sector, amid a lack of immediate policy responses from
European leaders.
Copper gained 1 percent to $7,717 a tonne while U.S.
crude rose 0.8 percent to $91.62 a barrel and Brent
added 0.6 percent to $107.42. A firmer euro helped lift
spot gold up 0.2 percent at $1,576.69 an ounce.
“The rise today is mostly due to short-covering,” said a
Shanghai-based copper trader with an international firm.
While hopes remain that a compromise can be found that will
keep Greece in the euro zone, talk of contingency plans have
emerged for the possibility that Athens leaves the euro, posing
severe contagion risks to the whole European currency bloc.
“Markets are highly conscious of the tail risk and talks of
drawing up contingency plans in case of a crisis are done
openly, suggesting a strengthening shift away from emerging
countries or risk assets into the dollar,” said Takao Hattori,
senior investment strategist at Mitsubishi UFJ Morgan Stanley
Securities in Tokyo.
“Having hit key lows for now, markets may see some respite
from one-way selling, but sentiment remains highly vulnerable
until the fate of Greece is clarified,” he said.
Surveys published on Saturday showed Greece’s conservatives
have regained an opinion poll lead that would allow the
formation of a government committed to keeping the country in
the euro zone.
Uncertainty, however, will persist until Greece holds the
crucial election on June 17, keeping markets guarded. Several
meetings of European leaders are also scheduled late in June.
Switzerland is drawing up plans for emergency measures
including capital controls in case the euro collapses, although
it does not expect to need them and will continue to defend a
cap on the franc in the meantime, the head of the central bank
said.
FUNDS TARGET DOLLAR
Currency speculators raised long dollar positions – bets the
currency will strengthen – to the highest level since at least
mid-2008, while euro short positions rose to the highest on
record, Commodity Futures Trading Commission data showed on
Friday.
Speculators also were net short on the Australian dollar,
having cut their net long positions all month.
The dollar index measured against key currencies rose
to a 20-month high of 82.461 on Friday, and was off around 0.5
percent at 81.998 on Monday.
Trading is expected to be subdued on Monday amid a lack of
key economic data and a U.S. market holiday for Memorial Day.
The euro rose 0.6 percent to $1.2588 on Monday, while
the Australian dollar gained 1 percent to reach a
one-week high of $0.9863, well above a six-month low of $0.9690
hit last week.
The euro hit $1.2495 on Friday, its lowest since July 2010,
after the president of Catalonia, Spain’s wealthiest autonomous
region, said it had few options to refinance over 13 billion
euros ($16.27 billion) in debt due this year.
Sentiment has been weakening on fears that rising bank
rescue costs could force the euro zone’s fourth largest economy
to seek an international bailout.
A government source said on Sunday that Spain may
recapitalise its fourth-largest bank, Bankia, which
last week asked for 19 billion euros in funding ($24 billion),
with government bonds in return for shares.
Investors cut their risk exposure across assets in the week
ending May 23, data from EPFR Global showed. Emerging markets
equity, commodities and energy sector funds and Europe equity
funds all saw redemptions in excess of $1 billion, while high
yield bond funds had their biggest outflows in over nine months.
