US Dollar, Asia Stocks Gain as Oil Price Dips

Asian stocks rebounded from a two-year low as the drop in oil prices lifted exporter shares.

The U.S. dollar rose broadly on Monday, hitting a two-year high against sterling, as tumbling oil and gold prices left investors scurrying to buy back the currency and sparked a rebound in Asian stocks.

A rally in the dollar stalled last week after hitting a six-month high against the euro, but an upward trend in the U.S. currency is seen intact.

Recent reports showing shrinking or no economic growth in Britain, the euro zone and Japan have boosted the attraction of the dollar as an alternative investment, especially with crude prices trading at around $114 barrel, $33 below a record high hit in July.

Even billionaire investor and long-time dollar detractor Warren Buffett, chairman of conglomerate Berkshire Hathaway Inc , came to the currency's aid on Friday when he said in a television interview that he had no bets against the dollar.

"The combination of incremental weakness in the European economy and the lower oil prices should keep the pressure on euro/dollar in our view," Nizram Idris, currency strategist with UBS in Singapore, said in a note.

Asian stocks rebounded from a two-year low as the drop in oil prices lifted exporter shares.

Japan's Nikkei share average jumped about 2 percent, with shares of Honda Motor Co leading the way higher

The MSCI pan-Asia stocks index was up 1.2 percent, after hitting the lowest since July 2006 on Friday. The MSCI Asia-Pacific ex-Japan index edged up 0.3 percent. Australia's benchmark share index was also up 2 percent.

The euro fell 0.4 percent to $1.4724, about a cent away from last week's low.

The British pound fell to $1.8415 its lowest since July 2006, hurt by data on Friday that showed Britain's gross domestic product was unchanged in the second quarter compared with an initial estimate of 0.2 percent growth -- bolstering the case for lower interest rates to spur activity.

Oil extended losses, after suffering the biggest daily decline since 2004 on Friday, helped by Russia's pledge to withdraw the bulk of its troops from Georgia and the uneventful passing of Tropical Storm Fay near the Gulf of Mexico.

"The easing of Tropical Storm Fay and the pullout of Russian troops from Georgia has taken some risk premium out of the market," said Toby Hassall, chief analyst at Commodity Warrants Australia in Sydney.

"But there will be some degree of geopolitical tensions as long as Russia still has troops stationed in Georgia."

U.S. light crude for October delivery slipped 46 cents to $114.13 a barrel.

Gold eased 0.5 percent to around $818 an ounce in the spot market, having shed more than $150 in the last month as oil prices fell and the dollar strengthened.