TOKYO - Asian shares shook off early losses on Friday, underpinned by overnight gains on Wall Street, while the dollar steadied after its recent rally ran out of steam on disappointing retail sales data.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up about 0.1 per cent on the day. It was well off 7-week lows plumbed earlier in the week but still on track for a weekly loss of around 2 per cent.
Japan's Nikkei stock average .N225 was up 0.9 per cent ahead of Friday's settlement for Nikkei futures and options contracts expiring in March. Investors with long positions in Nikkei futures would like to see them settle at a higher price.
On Wall Street, US shares rallied on Thursday, but the S&P 500 .SPX was still on track to post its third consecutive weekly decline, hit by the prospect of higher US interest rates and the effect of the strong dollar on corporate earnings.
But the dollar pulled away from its recent multi-year highs after US retail sales unexpectedly fell in February, a month marked by harsh weather. That tempered the outlook for first-quarter growth and gave investors reason to doubt that the Federal Reserve would hike interest rates as early as June.
However, many investors' rate-hike bets remained intact after last week's stronger-than-expected US payrolls report. The Fed's policy-setting committee meets next week, and investors hope the meeting will yield further clues about the timing of the rate increase.
"Despite the improvements in the labour market, rises in wages and decline in gas prices, Americans cut spending for the third month in a row but judging from the price action of the greenback, dollar bulls are telling themselves that weak retail sales does not change the bigger story of monetary policy and growth divergence," Kathy Lien, managing director at BK Asset Management, said in a note to clients.
Lien expects the US central bank to tighten in September.
The dollar index .DXY edged lower, after skidding 0.4 per cent on Thursday - its biggest one-day fall in a month. The index earlier rose as far as 100.060, a high not seen since mid-April 2003, and was still on track to end the week up more than 1 per cent.
Against its Japanese counterpart, the dollar edged up about 0.1 per cent on the day to 121.42 yen JPY=, moving back toward this week's nearly eight-year high of 122.04.
The euro also inched down about 0.1 per cent against the greenback to $1.0620 EUR=, but remained well above a 12-year trough of $1.0494 plumbed in the previous session. In sharp contrast with the Fed, the European Central Bank launched a quantitative easing programme this week that sent yields on the debt of nearly all euro zone countries to record lows, and prompted investors to park their funds elsewhere.
Oil prices steadied after an overnight selloff following estimates showing another big supply build at the delivery point for the US crude contract.
US crude CLc1 added about 0.1 per cent to $47.10 a barrel after plunging 2.3 per cent in the previous session, while Brent LCOc1 added about 0.4 per cent to $57.31 after shedding nearly 1 per cent.