Dollar hits four year high, Asian stocks on edge as Hong Kong seethes

TOKYO (Reuters) - The dollar hit a four-year peak against a basket of currencies in early Asian trade on Monday, bolstering Japanese shares, but other Asian shares shrugged off Friday's Wall Street rebound in the face of political unrest in Hong Kong.

MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> dropped 0.4 percent, hitting a 20-week low.

Japan's Nikkei average <.N225> rose 0.7 percent after U.S. shares bounced on Friday from sell-off the day before, with the yen's weakness flattering the export sector.

The region's other big share markets were less robust. Australian shares were hit by falls in iron ore prices, while South Korean counters were stung by the falling yen, which favors their Japanese competitors.

Australian shares dropped 0.6 percent <.AXJO> while Seoul shares dropped 0.2 percent <.KS11>.

The U.S. Commerce Department on Friday raised its estimate of gross domestic product growth to an annualized 4.6 percent, the fastest pace in 2-1/2 years, and accelerating from the 4.2 percent reported last month.

The data reinforced the perception that the United States is the brightest spot in the global economy, with the Federal Reserve on course to raise interest rates while other major central banks need to enact more stimulus to support growth.

The dollar index rose as high as 85.737 <.DXY>, its highest since July 2010, in early trade after having posted an 11th straight week of gains last week, extending the longest winning streak since its 1971 uncoupling from gold.

"Given that the Federal Reserve is on track to normalize its policy, you can can't bid up stocks and bonds too much. In a way, investors had nothing to do but to buy the dollar," said Tohru Yamamoto, chief strategist at Daiwa Securities.

The euro dropped to a 22-month low of $1.2667 and last stood at $1.2678, 0.1 percent below late U.S. levels on Friday.

The dollar rose to 109.52 yen , just shy of Friday's six-year high of 102.54.

The Australian dollar dropped 0.4 percent in early trade to $0.8727 , its lowest level in almost eight months, coming within sight of its January low of $0.8660.

Elsewhere, copper futures price fell to three-month lows of $6,666.0 per ton, extending their losses on worries over an expected supply surge and weak demand from top consumer China.

(Editing by Eric Meijer)

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