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Dollar hits one-month low to yen on dovish Fed, hawkish

BOJ

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Japan's Nikkei underperforms region as strong currency

weighs

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Investors wary ahead of Trump's inauguration on Monday

(Updates prices ahead of European markets open)

By Kevin Buckland

TOKYO, Jan 17 (Reuters) - Asian stocks edged up on

Friday, drawing support from unexpectedly strong growth in

China's economy at the end of last year, although gains were

limited by caution ahead of Donald Trump's inauguration as U.S.

president next week.

Japanese equities struggled though, with the Nikkei on

course for a third straight losing week, after the yen popped to

a one-month high amid rising bets for an imminent Bank of Japan

rate hike.

The dollar clawed back some of Thursday's steep declines

against major peers, the result of resurgent wagers on a Federal

Reserve rate cut by June. Treasury yields also halted their

decline, but remained close to the previous session's lows.

China's economy grew 5% last year, matching the

government's target, but in a lopsided fashion, with many people

complaining of worsening living standards as Beijing struggles

to transfer its industrial and export gains to consumers.

"China markets still face structural headwinds as well as

tariff risks, and the response to those will be the ultimate

driver of long-term returns," said Charu Chanana, chief

investment strategist at Saxo.

Mainland Chinese blue chips were up 0.47% as of

0632 GMT, while Hong Kong's Hang Seng added 0.29%.

China's yuan was flat at 7.3423 per dollar in offshore

trading.

Japan's Nikkei sagged 0.31%, paring earlier

losses of more than 1%. The yen had earlier climbed to

the highest since Dec. 19 at 154.98 per dollar then reversed

course to last trade about 0.4% lower at 155.69.

MSCI's world index edged down 0.05%. Its

broadest index of Asia-Pacific shares lost

0.17%.

European stock futures pointed higher though,

particularly in Britain where FTSE futures climbed

0.47%. Pan-European STOXX 50 futures edged up 0.04%.

U.S. S&P 500 futures gained 0.15%, after the cash

index closed down 0.2% overnight. Those small declines came

after a 1.8% jump on Wednesday - the biggest daily percentage

gain since the post-election rally on Nov. 6 - fuelled by strong

bank earnings at the start of the new reporting season.

"Investors are enjoying the re-anchoring of the market

narrative to company fundamentals and away from the macro, with

earnings season so far proving robust," said Kyle Rodda, senior

financial market analyst at Capital.com.

At the same time, declines in the dollar and bond yields

come as "fears of sticky or re-accelerating inflation and a

prolonged pause or an end to the Fed's cutting cycle eased," he

said.

Ten-year U.S. Treasury yields stood at 4.6148%

in the latest session, after sliding to the lowest since Jan. 6

at 4.5880% on Thursday, when Fed Governor Christopher Waller

said three or four interest cuts this year are still possible if

U.S. economic data weakens.

Ten-year Japanese government bond yields

eased along with overnight moves in Treasuries, even as comments

from BOJ Governor Kazuo Ueda and one of his deputies, Ryozo

Himino, this week spurred a rise in bets for a quarter-point

hike on Jan. 24 to 78%. They indicated wage growth would likely

remain strong this year and Japan was progressing towards

durably hitting its inflation target.

Sources told Reuters that following a likely policy

tightening, the central bank is set to maintain a pledge to keep

pushing up borrowing costs if the economy continues to recover.

The dollar index - which measures the greenback

against a basket of six major currencies, including the yen -

edged up 0.14% to 109.12, but remains 0.47% lower for the week,

threatening to snap six straight weeks of gains.

The euro eased 0.13% to $1.02875, while the

beleaguered sterling lost 0.21% to $1.2213.

Declines in bond yields supported alternative assets.

Bitcoin edged as high as $102,050.99 for the first

time since Jan. 7.

Gold stood at $2,712.36, hovering close to Thursday's

high of $2,724.55, its strongest in more than a month.

Meanwhile, crude oil headed for a fourth consecutive weekly

advance as the latest U.S. sanctions on Russian energy trade hit

supply and pushed up spot prices and shipping rates.

Brent crude futures rose 0.44%, to $81.65 per

barrel, on course for a 1.9% rise this week. U.S. West Texas

Intermediate crude futures were up 0.67% to $79.21 a

barrel, headed for a 2.76% advance for the week.