Asian shares, dollar rise on expectations of US rate increase

Growing confidence that the US will raise interest rates next month boosted the dollar in Asia on Monday, where shares took heart from a rally on Wall Street.

US stocks capped their best week this year on Friday as investors digested growing signs the Federal Reserve thinks the world's top economy is srong enough to handle a rate rise next month.

The prospect of the first increase for almost a decade boosted the greenback, but dragged down raw materials and energy shares as the stronger dollar made them more expensive for international investors.

Oil prices dipped, with US benchmark WTI trading around $40 a barrel. Copper broke below $4,500 a ton for the first time since 2009, nickel hit a 12-year low and gold fell for a second day.

The euro, meanwhile, fell after European Central Bank chief Mario Draghi on Friday hinted the lender could unleash further stimulus to boost stubbornly low inflation in the eurozone.

His pledge to "do what we must" to lift prices fuelled expectations the bank could expand its already vast easing scheme next month, pushing the single currency to a seven-month low.

"It's probably reasonable to think we can spend time down below $1.05 now," Ray Attrill, co-head of currency strategy at National Australia Bank, told Bloomberg News.

- Fed, ECB diverge -

Draghi's remarks contrasted sharply with comments from San Francisco Fed president John Williams over the weekend, who fuelled expectations of a rate rise when he said there was a "strong case" for an increase in December.

Market expectations were also fuelled by minutes from the Federal Reserve on Wednesday which showed its policymakers are satisfied the US economy is strong enough to withstand a rate hike next month.

Emerging-market currencies fell against the dollar on Monday, with Bloomberg's benchmark gauge of the units heading for its first drop in five days.

"The markets are still quite euphoric on the increased prospects of Fed rate hike in December, which prompted bullish USD positioning," said Bernard Aw, market strategist at IG in Singapore.

"With the futures market pricing in a close to 70 percent odds of a December rate action, USD strength is likely to persist."

Shares in Sydney and Seoul ended higher on Monday, while other markets also rose. Tokyo was closed for a public holiday.

But materials shares were hurt by the slide in commodities, with global miner BHP Billiton dropping 2.1 percent in Sydney and Chinese energy giant Sinopec losing almost one percent in Hong Kong.

Hong Kong's benchmark index also fell, led by a slump in major Chinese brokerage Guotai Junan after the company said its chairman and CEO Yim Fung could not be found.

The company's shares fell by as much as 17 percent on Monday, the day after the southern Chinese city held its first elections since huge pro-democracy protests last year.

Key figures around 0700 GMT

Tokyo - Nikkei 225: CLOSED

Hong Kong: DOWN 0.33 percent at 22,680.18

Sydney: UP 0.4 percent at 5,276.4 (close)

Euro/dollar: DOWN to $1.0622 from $1.0641 in New York

Dollar/yen: UP to 123.17 yen from 122.85 yen

New York - Dow: UP 0.51 percent at 17,823.81 (close)

New York - S&P 500: UP 0.38 percent at 2,089.17 (close)

New York - Nasdaq: UP 0.62 percent at 5,104.92 (close)

-- Bloomberg News contributed to this report --