Asia stocks fall,dollar rises

Sentiment was also turning negative after the US Samp;P 500 stocks index closed lower for a second day after hitting a 3-year high on Monday,hurt by fears corporate earnings would not live up to high expectations.

8220;Risky assets are having a respite,having advanced rather quickly in more recent weeks,8221; said Andy Ji,a currency strategist and economist with Commonwealth Bank of Australia in Singapore.

8220;I continue to see fundamental support either waning or fully priced in many risky assets,including currencies that are more risk-sensitive.8221;

The dollar gained 0.12 per cent against a basket of currencies as there was some unwinding of stretched short positions maintained by hedge funds betting on a rise in Asian currencies.

Deutsche Bank8217;s internal gauge of market positioning that tracks moves among hedge funds had shown that long positions in some of the Asian currencies had been close to a record high as of last Thursday,said Mirza Baig,the bank8217;s senior currency strategist in Singapore.

8220;In general it feels really,mostly like a position reduction kind of a move,8221; he said,referring to the dollar8217;s broad rise against emerging Asian currencies. 8220;Positioning was definitely quite stretched.8221;

Ji said the likelihood of further unwinding was making some Asian assets less attractive.

8220;While I still think the general USD weakness would linger and provide a lift to risky assets,the trade-off in chasing aggressively the strength in these assets has turned less attractive or is dependent primarily on the extent of USD weakness in the coming months,8221; he said.

In Australia,the benchmark Samp;P/ASX 200 index was down 48 points or 1.0 per cent at 4,7337 as of 0347 GMT,adding to a 0.8 per cent fall on Tuesday. The Australian and New Zealand dollars also lost ground as a reluctance to take risk prompted investors to book profits on hefty gains made last month.

Stock markets in Hong Kong,Singapore,Korea and New Zealand also fell. The Hang Seng index was off nearly 1.3 per cent. Japan8217;s financial markets were closed for the Golden Week holiday.

MSCI8217;s broadest index of Asia-Pacific shares excluding Japan ,which also has a strong correlation to silver prices,fell more than 1.4 per cent.

Silver suffered its biggest two-day loss since October 2008,dragging down gold and other commodities. After hitting an all-time high within a whisker of 50 an ounce last Thursday,spot prices were at 41.2 on Wednesday. Gold was also down about 0.6 per cent.

Oil prices were dragged down after data showed US crude stocks rose sharply last week,adding to concerns about demand and gains in the dollar that helped spark a technical sell-off.

ICE Brent crude for June fell 70 cents to 121.75 a barrel by 0205 GMT,near Monday8217;s low of 121.67 and its third straight session of losses.

In currency markets,euro/sterling was at 0.89830 ,within striking distance of a 13-mth high of 0.90065 hit on Tuesday. The pair climbed one per cent on Tuesday after disappointing UK PMI data signalled that a rate hike may be further away than expected.

In contrast,the European Central Bank is expected to signal its readiness to raise interest rates after its policy meeting on Thursday,and may prepare the market for a June hike.