Commodities jump, Nikkei hits 3 month highs

Gold led a rally in commodities to hit a record on Monday while Japanese shares were at three-month highs as demand for higher-yielding assets got a lift from a surprisingly strong U.S. jobs report.

A super-loose U.S. monetary policy that promises to keep U.S. interest rates near zero for a long time has driven investors to look for yield, in part on worries that easy policy would fuel future inflation.

Friday's U.S. jobs report, which showed private firms hiring at the fastest pace since April, further supported investor demand for risk, a bounce in the U.S. dollar on short-covering notwithstanding.

Indeed, some Japanese investors cheered the bounce in the U.S. dollar as it tempered gains in the strong yen, offering some reprieve to Japanese exporters.

The dollar bought 81.23 yen in early Asian trade, more than a yen lower than the 15-year high of 80.21 yen hit last week.

"We are watching whether there are more strong economic indicators from the United States. More strong signs would push up the dollar and encourage inflows into Japanese export-related shares," said Hideyuki Ishiguro, a supervisor in the investment strategy section at Okasan Securities.

The slight retreat in the yen helped Japan's Nikkei average .N225 rise 0.8 percent to a three-month high, the best performer in Asia in early trade.

The MSCI Asia ex-Japan index .MIAPJ0000PUS was off 0.15 percent, just under a 2-1/2-year high hit on Friday.

For the year however, the MSCI index easily outperforms the Nikkei. It has jumped 16 percent since January, compared to a 8 percent drop in Japanese shares.

The bounce in the U.S. dollar did little to crimp demand for commodities. Gold <GOL/>, a traditional hedge against inflation, powered to a record above $1.398 an ounce.

Oil prices <O/R> held above $87 a barrel near a two-year high and silver hit a new 30-year peak

The stronger U.S. dollar had a bigger impact in currency markets. It pulled the euro under $1.40, triggering a rush of stop-loss selling and dragged other higher-yielding currencies such as the Australian dollar down as well.

[Source: Reuters, Sidney, 07Nov10]

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