Asian shares gain on improving sentiment, G20 eyed

TOKYO (Reuters) - Asian shares rose on improving risk sentiment while the yen steadied ahead of the weekend meeting of G20 finance and central bank officials, as investors scrutinize their views on global growth and differences over currencies.

The MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> extended gains, rising 0.6 percent as its materials sector <.MISPJMT00POUS> outperformed with a 1.4 percent increase partly on a jump in shares of top miners ahead of earnings news from Rio Tinto .

Australian shares rose 0.6 percent, hitting their highest since September 2008, as a strong earnings season and receding fears about European and U.S. debt woes bolstered investor sentiment.

South Korean shares <.KS11> rose 0.4 percent after hitting a three-week closing high and logging their biggest daily percentage gain since January 2 on Wednesday when investors cheered a pause in the yen's decline.

"There is little change seen...the index saw a steep gain yesterday, and with the G20 meeting coming later this week the main board is not likely to move drastically in one direction until next week, said Kim Young-il, an analyst at Daishin Securities, of South Korean equities.

A pause in the yen's recovery affected Japanese equities positively on Thursday, with the Nikkei average <.N225> advancing 0.6 percent after Wednesday's 1 percent slump when the firming yen prompted investors to take profits on exporters. <.T>

The Bank of Korea held interest rates steady for a fourth straight month on Thursday as expected, as global economies show signs of improvement and domestic inflation remains low. But the decision was not unanimous, its governor told a news conference.

The Bank of Japan is unlikely to take fresh easing steps when it ends its two-day policy meeting on Thursday.

Markets in China and Taiwan remain shut for the Lunar New Year holiday but Hong Kong resumes trading on Thursday.

Key European shares indexes rose above the past week's trading range on Wednesday, boosted by upbeat 2012 corporate reports from firms with exposure to fast-growing emerging markets. But U.S. stocks ended little changed, after the Standard & Poor's 500 Index <.SPX> briefly hit its highest intraday level since November 2007.

YEN IN SPOTLIGHT

The dollar recouped earlier losses to inch up 0.1 percent to 93.49 yen after marking its highest level since May 2010 of 94.465 on Monday. The euro was up 0.1 percent to 125.72 yen, below its peak since April 2010 of 127.71 yen touched last week.

The yen lost nearly 20 percent against the dollar between November and early February, and more than 20 percent against the euro.

The yen began its steady fall in mid-November as expectations built for a new government to take aggressive steps to bring Japan out of years of slump. Prime Minister Shinzo Abe is pushing for strong reflationary steps, pressuring the BOJ to take unprecedented expansionary measures.

The yen's rapid depreciation, after years of sharp appreciation, has drawn some criticism from overseas, with rhetoric heating up ahead of the G20 meeting, the latest coming from Russia, chair of the Group of 20 nations.

Deputy Finance Minister Sergei Storchak told reporters on Wednesday in Moscow, ahead of the G20 meeting on Friday and Saturday, that the yen was "definitely overvalued" and that "there are no signs" that Japan's monetary authorities were intervening on the foreign exchanges.

"Various interpretations this week over what the G20 may say about Japan's policy and a weak yen trend have been used as an excuse to adjust positions ahead of the meeting, and I expect forex to be in ranges," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo.

"Currency will be discussed but I think Russia wants the meeting to focus on broader economic issues involving emerging markets as it is the G20 gathering," he said.

Traders and analysts say 90-95 yen to the dollar appeared to be a comfortable range for now, unless upside surprises emerge in the U.S. economy or Japan quickly implements unexpectedly drastic reflationary policies, both of which will swing the dollar higher above the range.

But they said any yen buyback will likely lose momentum around 87 yen, halfway between the yen's slump from mid-November to early February.

Market reaction was muted to comments from Jack Lew, President Barack Obama's pick to run the Treasury Department, who on Wednesday said he would support a strong U.S. dollar, in line with longstanding U.S. policy.

Data published on Thursday showed Japan's economy shrank 0.1 percent in October-December from the previous quarter, falling for a third straight quarter.

U.S. retail sales barely rose in the month as tax increases and higher gasoline prices restrained spending.

But sentiment in Europe improved after an Italian bond auction drew strong demand on Wednesday despite uncertainty over next week's elections, and euro zone factory output data confirmed a recovery, albeit slow.

U.S. crude was up 0.2 percent to $97.18 a barrel and Brent added 0.1 percent to $117.96.

London copper rose 0.2 percent to $8,243.75 a metric ton (1.1023 tons).

(Additional reporting by Joyce Lee in Seoul; Editing by Eric Meijer)

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