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[TOKYO] Most Asian stock markets fell on Thursday as upbeat economic data strengthened the prospect for higher US interest rates, while the US dollar's bull run continued as US bond yields hovered near multi-year highs.
Japanese stocks swam against the tide and rose to a near 11-month high as the yen weakened and after Wall Street shares closed at record highs overnight.
The US dollar index against major currencies rose nearly 0.2 per cent to 101.84, not far from 101.91 touched overnight, its highest since March 2003.
The greenback drew support from a further rise in US Treasury yields.
The two-year yield hit its highest levels since April 2010 on Wednesday as the market continued to bet that the Trump administration will increase debt-funded spending and spur higher growth and inflation.
Such a view - which has also lifted expectations for more interest rate hikes by the Federal Reserve next year - was reinforced on Wednesday by data that showed new orders of US manufactured capital goods rebounded in October. Consumer sentiment also jumped in November in the wake of Mr Trump's election.
"It (the US dollar) is a freight train that seems over limit at the moment, but it may have a long way to go before what looks and feels like a structural adjustment settles down," said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
The US dollar was up 0.2 per cent at 112.740 yen after touching an eight-month high of 112.980 overnight. It has gained roughly seven big figures against its Japanese counterpart since Mr Trump's victory earlier this month.
The euro was down 0.2 per cent at US$1.0530 after touching US$1.0526 overnight, its lowest since Dec 4, 2015. The common currency has dropped nearly 4 per cent so far in November.
The firm US dollar kept most emerging market currencies on the ropes, with China's yuan nearing the seven per US dollar level for the first time since May 2008.
In equities, MSCI's broadest index of Asia-Pacific shares outside Japan pulled back from a 12-day high scaled the previous day to lose 0.5 per cent, facing the prospect of higher US interest rates diverting money from emerging markets. It has lost 3.5 per cent this month.
Australian shares shed 0.1 per cent and South Korea's Kospi fell 0.5 per cent. Shanghai was up 0.1 per cent and Hong Kong's Hang Seng dropped 0.5 per cent.
Japan's Nikkei was up one per cent, touching its highest level since early January.
"If you want to hedge or profit from a 'make America normal again' trade, the best way is through the Japanese equity market, and specifically the banks," wrote Chris Weston, chief market strategist at IG in Melbourne.
Shares of Japan's banks, along with some of their global peers, have climbed following Mr Trump's win, buoyed by the rise in yields and prospects of improved business opportunities under the next US administration.
Equities in emerging and developed economies have headed in different directions since Mr Trump's win.
Higher US yields have pulled those of other developed economies from rock-bottom levels, with investor money now expected to flow back from emerging markets which had offered relatively higher rates.
The Dow marked a record closing high overnight while Germany's DAX has gained nearly 2 per cent since the victory by the Republican candidate. On the other hand, MSCI's emerging markets index has fallen 5.8 per cent this month.
Continuing to feel the tug of higher US yields, Japan's 30-year bond yield rose to an eight-month peak of 0.640 per cent. The German 10-year bund yielded around 2.6 per cent on Wednesday, having climbed from a record low of minus 0.2 per cent struck in July.
Oil prices were little changed amid uncertainty ahead of a planned Opec-led crude production cut at a meeting on Nov 30.
US crude was up one US cent at US$47.97 a barrel and Brent was down two US cents at US$48.93.