Dollar, Asia shares find relief in China, U.S. economic news

By Wayne Cole

SYDNEY (Reuters) - Investors rediscovered a taste for the dollar and Asian shares on Thursday as upbeat Chinese and U.S. economic news whetted appetite for riskier assets globally, even as tensions over North Korea simmered in the background.

Oil prices were upended as flooding and damage from Tropical Storm Harvey shut nearly a quarter of U.S. refinery capacity, curbing demand for crude.

The resulting risk of fuel shortages sent U.S. gasoline futures up 6.4 percent in Asian trading to their highest in over two years. Prices have surged more than 20 percent in the past week. [O/R]

Adding to the brighter mood, a survey showed growth in Chinese manufacturing sector unexpectedly accelerated in August, confounding forecasts for a slight slowdown. The official version of the PMI firmed to 51.7, from 51.4 in July.

 

MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> edged up 0.2 percent, leaving it a modest 0.7 percent firmer for the month so far.

Japan's Nikkei <.N225> rose 0.6 percent to its best level in two weeks, helped by a pullback in the yen. The index was still down 1.5 percent on the month, however.

Wall Street got a boost on Wednesday when data showed the U.S. economy grew at an upwardly revised 3 percent annualised pace in the second quarter, courtesy of robust consumer spending and strong business investment.

Other figures showed U.S. private-sector employers hired 237,000 workers in August, the biggest monthly increase in five months and an upbeat omen for payrolls on Friday.

The Dow <.DJI> rose 0.12 percent, while the S&P 500 <.SPX> gained 0.46 percent and the Nasdaq <.IXIC> 1.05 percent. [.N]

The better economic news helped distract from rumblings in the Korean peninsula and lifted the U.S. dollar.

President Donald Trump on Wednesday declared "talking is not the answer" to the tense standoff with North Korea over its nuclear missile development, but his defence chief swiftly asserted that diplomatic options remain.

Against a basket of major currencies, the U.S. dollar held at 92.868 <.DXY> having crept away from a 2-1/2-year low of 91.621 touched on Tuesday. [/FRX]

The dollar also bounced to 110.40 yen > and off Tuesday's 4-1/2-month low of 108.25.

The euro recoiled to $1.1894 > from its top of $1.2069, weighed in part by speculation the European Central Bank might start to protest at the currency's strength.

"The ECB meeting is coming up next week and there are rising risks of verbal intervention from Mario Draghi," said Deutsche Bank strategist George Saravelos.

"Despite this the euro level does not appear particularly extreme and most importantly the ECB has not been driving recent appreciation anyway," he added. "Verbal rhetoric may cause a correction but is unlikely to be enough to derail euro strength."

The bounce in the dollar kept gold restrained at $1,307.44 an ounce >, just short of Tuesday's 9-1/2-month high of $1,325.94. [GOL/]

With so much U.S. refinery capacity shut in the wake of Tropical Storm Harvey, oil prices were hit by demand concerns. Brent eased 10 cents to $50.76 a barrel, while U.S. crude fell 3 cents to $45.93.

(Editing by Kim Coghill)