By Lisa Twaronite
TOKYO (Reuters) - Asian shares turned higher on Tuesday, reversing earlier losses on the back of gains in Hong Kong and China, while the dollar extended highs scaled in holiday-thinned trading in the previous session and pushed to an eight-year high against the yen.
But European markets were seen opening broadly lower on the first day of the trading week for several countries after a holiday weekend, with Greece's ongoing debt drama in focus and after a poor local election result for Spanish Prime Minister Mariano Rajoy.
Financial spreadbetters expected Britain's FTSE 100 to open 4 to 8 points higher, or around 0.1 percent, Germany's DAX to open 40 to 45 points lower, or 0.4 percent, and France's CAC 40 to open 14 to 17 points lower, or 0.3 percent.
"A bright spot for European equities could come from a weaker euro as EUR/USD is now below 1.1000 and could come under further selling pressure," Stan Shamu, a market strategist at IG in Melbourne, said in a note to clients.
European shares had a weak finish in thin trade on Monday, with many markets in the region closed. U.S. markets were closed for Memorial Day.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.4 percent in late afternoon trade, after eking out a late gain in the previous session. Australian shares rose 0.9 percent.
Hong Kong's Hang Seng index jumped 1.3 percent, flirting with seven-year highs, on expectations of more money inflows from the mainland following Beijing's fresh moves to expedite cross-border investment. Mainland bourses also rose, with the CSI300 Index and the Shanghai Composite Index both rising 1.6 percent to fresh seven-year highs
China announced over the weekend that it would allow funds domiciled in Hong Kong and China to be sold in each others' market starting July 1, in Beijing's latest step to facilitate cross-border investment.
Japan's Nikkei stock index ended up 0.1 percent, logging its eighth straight gain and closing at a fresh 15-year high, though some strategists said that investors might start taking profits at the current lofty levels.
"Whether it's a political risk in the euro zone, volatility in the bond market or the timing of a U.S. rate hike, we can't ignore these risks," said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, explaining why investors might unwind some of their bullish positions.
The dollar hit a fresh one-month high against a basket of major currencies, extending a rally triggered by Friday's comments from Federal Reserve Chair Janet Yellen, who rekindled market expectations that the U.S. central bank was gearing up to hike interest rates.
Yellen said she expected economic data to strengthen and noted that some of the U.S. economy's weakness at the start of the year might be due to "statistical noise."
The dollar index rose as high as 96.734, and was last up about 0.7 percent at 96.719.
Fed Vice Chair Stanley Fischer said in Israel on Monday that too much importance was being placed on the central bank's first rate hike, and that the process of returning to more normal levels of interest rates will take a few years.
While markets largely expect the first rate hike in September, it will be determined by data and not by date, he said.
Investors await the latest batch of U.S. data later on Tuesday that could provide more clues on the strength of economic recovery, including May durable goods and April consumer confidence.
Greece's debt crisis kept pressure on the euro. Time is running out for Greece to reach an agreement on reform with lenders and there will be no further funds for Athens without it, the head of the European Stability Mechanism, Klaus Regling, told Germany's Bild newspaper on Tuesday.
"The Greek political saga will remain in the spotlight as the deadline for payments to the IMF approaches", strategists at Barclays wrote in a note to clients. "A light data calendar and continued political uncertainty in Greece should continue to weigh on EUR," they said.
The euro skidded about 0.5 percent at $1.0917, breaking below its overnight nadir and wallowing at its lowest levels since late April.
The dollar surged 0.6 percent against the Japanese currency to 122.36 yen, breaking above the 122 level for the first time since March 10 and reaching an eight-year peak.
Crude oil firmed, extending gains made in Monday's thinned trading as firm global demand offset the effects of a stronger dollar.
Brent crude was up slightly at $65.54 a barrel, while U.S. crude added 0.2 percent to $59.86.
(Additional reporting by Ayai Tomisawa in Tokyo; Editing by Shri Navaratnam and Richard Borsuk)
