Asian shares nudge upward

SINGAPORE (Reuters) -- The yen rose against the high-yielding Australian and New Zealand dollars, as dealers unwound risky carry trades, while Asian shares nudged up 0.5 percent in a see-saw session.

European stocks were called to open higher after a late U.S. rally and as Asian stock markets recovered from earlier losses on fears that economic growth may be hurt by a global credit squeeze.

"The Dow's rise yesterday got people to think that things might be settling down, but it's not over yet," said Toru Tanaka, a senior manager for treasury and foreign exchange at Mitsubishi. "The moves are really hectic, and you have to be careful."

The Australian and New Zealand dollars -- typically the counterparties to carry trades where investors borrow low-yielding yen to invest in high-yielding assets -- both fell over 1 percent against the yen at one point.

The dollar fell to 118.82 yen but was still up sharply from the three-month low of of 117.60 yen struck on electronic trading platform EBS on Wednesday.

MSCI's measure of Asia Pacific stocks excluding Japan was up 0.5 percent, with sharp swings across all markets after a near 4 percent fall for the index the previous day.

Japan's Nikkei 225 closed up 0.7 percent after dropping by more than 1 percent to a 4-1/2-month low at one point. Property stocks were boosted by reports of higher land prices in Tokyo, but bank shares fell on worries that they will sustain damage from the credit market crunch.

Other Asian stock markets were mixed, with Korea's KOSPI down 0.2 percent and Australia's S&P/ASX 200 up 1.2 percent after suffering its biggest daily fall in nearly six years on Wednesday.

Shares in Macquarie Bank -- whose warning of losses at two of its U.S. investment funds acted as one of the triggers of Wednesday's falls -- were steady, after dropping more than 10 percent the previous day.

Japanese government bonds closely tracked the swings in the Nikkei, with JGB futures ending down 32 ticks at 133.18 as the market struggled to digest a 1.9 trillion yen ($16 billion) 10-year auction.

"JGBs are being whipped around by stocks today, but the market is also having to deal with the reopened issue, which is making it hard for prices to rise," said Akihiko Inoue, market analyst at Mizuho Investors Securities.

Volatility looks set to continue dominating across asset classes, with the Chicago Board of Trade's volatility index hitting its highest in four years on Wednesday, while spreads on high-yield Asian corporate debt over U.S. Treasuries have doubled in the past month.

A key question investors are asking is whether the market turmoil and record energy prices will derail global economic growth, something which the International Monetary Fund at least thinks is unlikely.

"The latest market volatility has not substantially changed our outlook on the global economy," the IMF's First Deputy Managing Director John Lipsky said on the sidelines of an APEC finance ministers conference.

The IMF's global growth forecast stood at 5.2 percent for both 2007 and for 2008, although Lipsky did say that economic risks were for slower rather than faster growth. E-mail to a friend

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