Dollar rises on Fed nomination report; Asian shares fall

Reuters

TOKYO (Reuters) - The dollar rose on Friday after Japan's Nikkei newspaper said U.S. President Barack Obama will name former Treasury Secretary Lawrence Summers as chairman of the Federal Reserve Board, while gold and oil declined as the Syrian chemical weapons crisis abated.

The greenback gained 0.4 percent to 99.950 yen, pulling away from a one-week low touched overnight as investors fretted over not whether but by how much the U.S. central bank will cut its monthly stimulus at next week's policy meeting.

Against a basket of major currencies, the dollar was up 0.3 percent, also bouncing from a two-week trough reached on Thursday.

Debate in Washington has focused on whether Obama will pick Summers or Fed Vice Chair Janet Yellen to succeed Ben Bernanke, whose term as head of the U.S. central bank expires in January. The appointment must be approved by the Senate.

The Nikkei said the president "is set to" name Summers as early as next week. Reports in the New York Times and Washington Post earlier this month suggested Obama was strongly inclined to pick Summers.

Traders said the Nikkei report helped give an added lift to U.S. Treasury yields and the dollar, both of which had already been edging higher on the day even before the Nikkei story reached the market.

"You have to wonder just how credible it is. I mean it would be understandable if the New York Times or the Wall Street Journal were reporting this," said a trader for a Japanese bank in Singapore.

"But the market seems to be showing some reaction to this," the trader added.

The Fed is expected to reduce its $85 billion a month bond-buying programme at its two-day meeting ending on Sept 18. But weaker-than-expected data, including jobs growth in August and consumer spending and durable goods orders in July, deepened uncertainty about the extent of the reduction.

A Reuters poll of economists on Monday found that most now see the Fed trimming its $85 billion monthly spending on bonds by about $10 billion, compared with estimates for a $15 billion reduction in a poll before the jobs report.

MSCI's broadest index of Asia-Pacific shares outside Japan shed 0.8 percent, pulling further away from a three-month high and on track for a second losing day after a 10-day winning streak -- its longest such run in six years. The Asian gauge is still up 2.2 percent this week.

In Tokyo, the Nikkei share average edged up 0.1 percent, supported by its five-day moving average.

European stocks were seen edging lower, with the futures for the Euro STOXX 50, Germany's DAX and France's down 0.1 to 0.2 percent.

As the dollar ground higher, gold turned south, down 0.5 percent, adding to a 3.4 percent slide on Thursday, its biggest one-day decline in more than two months as the Syrian chemical weapons crisis eases.

The precious metal is down 5.5 percent this week, on track for its biggest weekly decline in three months.

The U.S. and Russia began talks on Thursday on Moscow's plan for Syria to surrender its chemical weapons as Damascus formally applied to join a global poison gas ban, but Secretary of State John Kerry held fast to the position that the U.S. may still use military force if diplomacy fails.

Worries over a possible U.S. military strike against Syria spooked risk markets sending oil and gold prices higher and driving equities lower globally.

Brent crude added 0.1 percent to around $112.7 a barrel on Friday but was still heading for its biggest weekly drop in three months.

(Reporting by Dominic Lau and Masayuki Kitano; Editing by Eric Meijer)

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