Tokyo: Shares rise as dollar holds rebound; wheat extends advance

[WELLINGTON] Japanese shares rose following a record- setting day in the US, as the dollar cemented a rebound against major and emerging-market peers. Wheat extended gains near a five-week high.

The Topix index added 0.3 per cent by 9:33 am in Tokyo, rising a third day as most equities on the MSCI Asia Pacific Index advanced. US index futures gained 0.1 per cent after both the Standard & Poor's 500 Index and the Dow Jones Industrial Average reached all-time highs. The greenback bought 119.94 yen following the Bloomberg Dollar Spot Index's rally from a four- month low. Currencies from New Zealand to Malaysia slipped, and Australian bonds dropped. Wheat futures gained 0.5 per cent on prospects rain in the US has reduced crop yields.

Investors are looking ahead to US housing data and minutes of the Federal Reserve's April meeting due this week, amid doubt the economic recovery is strong enough to withstand higher interest rates. The prospect American borrowing costs will stay near zero for longer has fueled stock gains and sent the dollar to its lowest level since January. Australia's central bank releases a record of its May meeting Tuesday, and Indonesia reviews rates. Data on euro-area prices is also due.

"Patchy US data means that the Fed is highly unlikely to begin its policy normalization process until late in the December quarter," Matthew Sherwood, Sydney-based head of investment strategy at Perpetual Ltd., which manages about US$21 billion, said in an e-mail. "There has been a large upward movement in the dollar in the past 10 months and this has clearly weighed on US growth. The Fed could not possibly be convinced that the economy is on the right track until growth is above 3 per cent for two consecutive quarters."

BLOOMBERG