* Dollar hits 5 1/2-month high vs yen
* Ex-Japan Asia MSCI near 4 1/2-month low, Nikkei up 0.5 pct
* U.S. 10-year yields near Nov 2015 peak
By Hideyuki Sano
TOKYO, Nov 21 Asian shares were on the defensive
on Monday, undermined by fears that the strength in the U.S.
dollar and rising U.S. bond yields since Donald Trump's election
to president could accelerate fund outflows from the region back
to U.S. markets.
Asian markets were steady to slightly lower, with Hong
Kong's Hang Seng flat, Australian shares down 0.2
percent and South Korea's Kospi falling 0.3 percent.
But Japan's yen-sensitive Nikkei bucked the trend,
rising 0.8 percent to hit a 10 1/2-month high, thanks to the
weaker yen. European shares were expected to gain, with
spread-betters seeing a rise of 0.2 percent in Germany's DAX
and Britain's FTSE.
Trump's unexpected election victory has led to a major
repricing of assets, with investors rushing to buy U.S. stocks
and the dollar, while dumping bonds and emerging market assets.
Trump's plan to expand fiscal spending, including more
infrastructure spending, could be a game changer for markets
that have long taken a policy mix of fiscal discipline and loose
monetary policy for granted.
Under Trump's reflationary policies, the Federal Reserve
might have to raise interest rates faster than expected to
curtail inflation, making U.S.-dollar based assets more
attractive at the expense of emerging nations.
"The markets driven by Trump may be just about to have run
their course for now," said Toru Ohara, chief investment officer
at Okasan Asset Management.
"A rise in interest rates is, generally speaking, not good
thing for stocks, especially for emerging markets. But if you
think that U.S. bond yields, which have been falling since 1982,
may be bottoming out, that could mean the end of a low-growth/
low-inflation regime," he said.
Heightened uncertainty prompted investors to demand higher
premiums for holding long-term U.S. debt, with the 10-year U.S.
Treasuries yield accelerating to 2.364 percent by
last week from around 1.86 percent before the elections.
It last stood at 2.340 percent, with a rise above its 2015
peak of 2.5 percent seen as having potential to spark a further
sell-off as bond prices fall.
To be sure, investors have little idea of the extent that
Trump could actually implement his proposals, which include
putting tariffs on goods from major trading partners such as
China and Mexico, and going ahead with heavy tax cuts that would
widen the U.S. fiscal deficit.
Some investors suspect markets will soon have a reality
check as differences between the new administration and Congress
over some of Trump's policies begin to emerge.
"Next week, we have events that would make investors more
sober, such as the OPEC meeting and Italian referendum. By then
this Trump-inspired market may have come to an end for now,"
said Norihiro Fujito, senior investment strategist at Mitsubishi
UFJ Morgan Stanley Securities.
Higher U.S. yields are helping the dollar continue its bull
run. The greenback rose to as high as 111.19, its highest
level since early June. It last stood at 111.08.
It has risen almost 10 percent from its low of 101.19 hit on
Nov 9, when Trump's victory was initially seen as stoking
uncertainty and triggering a rush to safer assets such as the
The euro traded $1.0604, having hit a near one-year
low of $1.0569 on Friday.
The Australian dollar hit a 4-1/2-month low of $0.7311 while
the Chinese yuan fell to an 8 1/2-year low of 6.8992
to the dollar.
The data from the U.S. financial watchdog showed on Friday
that in the first week after the U.S. elections speculators
barely increased their net long positions in the dollar.
"This suggests the leveraged fund community largely missed
out on the dollar rally," analysts at ANZ Research wrote.
Many emerging market currencies remained under pressure on
fears investors could bring their money back to the United
States. The Malaysia ringgit hit 14-month low while the
Philippine peso edged to near its 2008 low.
Oil prices rose in early Monday trade after five-percent
gains last week, their first weekly gains in about a month, on
growing expectations that OPEC will find a way to cap
The Organization of the Petroleum Exporting Countries is
moving closer to finalising its first deal since 2008 to limit
output, with most members prepared to offer Iran flexibility on
production volumes, ministers and sources said.
Brent crude futures rose 1.3 percent to $47.47 per
(Reporting by Hideyuki Sano; Editing by Eric Meijer & Shri