Filomena Scalise

Tokyo - Asian shares shrugged off early losses on Wednesday, while the dollar was close to 14-month highs against a basket of major currencies after data underscored that the US economy continues to gather gradual momentum.

The Institute for Supply Management said its US manufacturing activity index rose to 59.0 in August, the strongest since March 2011. July construction spending was at its highest level in over 5-1/2 years.

MSCI's broadest index of Asia-Pacific shares outside Japan added 0.4 percent. It opened lower after Wall Street marked a mixed day, though the upbeat US economic data underpinned shares and limited losses.

Japan's Nikkei stock average rose 0.8 percent to a seven-month high, riding the weaker yen. Hopes that Prime Minister Shinzo Abe's cabinet reshuffle will give fresh momentum to his growth-oriented policies also lifted sentiment.

“I guess US shares did not benefit much from the data because it could mean an earlier rate hike but for Japanese exporters, signs of a strong US economy is positive,” said Soichiro Monji, chief strategist at Daiwa SB Investments.

The dollar edged up about 0.1 percent on the day to 105.19 yen after topping the 105 level overnight for the first time since January. It rose as high as 105.22 yen on Tuesday, with its 2014 peak of 105.45 yen in sight. A break above that would bring it to levels it last visited in October 2008.

The dollar was steady against a basket of major currencies at 82.978 after rising as high as 83.039 on Tuesday, its highest since July 2013.

Rising US yields lent more lustre to the dollar, as the benchmark 10-year US yield posted its biggest daily rise in a month after markets were closed on Monday for Labour Day. The 10-year yield stood at 2.430 percent in Asia, up from Tuesday's US close of 2.419 percent.

US manufacturers fared better last month than their European and Asian counterparts, which bore the brunt of the impact of the Ukraine crisis and China's uneven demand.

A government survey showed on Wednesday that activity in China's services sector recovered slightly last month, suggesting the sector remains relatively resilient compared to the manufacturing industry. But pressure remains on the government to roll out fresh policy stimulus measures to support growth.

“As economic and monetary policy divergence between the US and the rest of the world widens, the dollar will become more attractive to foreign investors, providing room for further gains,” Kathy Lien, managing director at New York's BK Asset Management, said in a note to clients.

The euro, which touched a one-year low of $1.3110 on expectations that the European Central Bank will take further easing steps, was steady on the day at $1.3133.

Some investors say the ECB could unveil fresh stimulus as early as Thursday, after French President Francois Hollande and ECB President Mario Draghi agreed on Monday that deflation and weak growth were threatening the European Union's economy.

The buoyant dollar pressured prices of dollar-based commodities, though gold and oil came off their overnight lows.

Spot gold edged up slightly to $1,267.16 an ounce after plunging 1.7 percent in the previous session as the dollar spiked higher.

Brent crude oil futures added 0.4 percent to $101.71 a barrel after they fell to their lowest level in 16 months overnight on slowing oil demand growth in China and Europe. US crude also tacked on about 0.4 percent on the day to $93.26 a barrel, after sliding $3.08 on Tuesday as ample supplies pushed US prices to their lowest level since January. - Reuters