HONG KONG-Japanese shares extended losses on Monday amid worries a strong yen would derail the fragile economic recovery, while the Australian dollar recovered after falling to a one-month low on inconclusive weekend elections. Broad investor concerns about the global economic recovery are weighing on regional stocks which fluctuated through positive and negative territory following a string of weak economic data releases from the United States last week. Political uncertainty pulled the Australian dollar down initially to a one month trough of $0.8833 but the unit made a quick rebound to trade at $0.8905, down 0.4 per cent. Australian stocks also rebounded after an early fall to trade flat, led almost entirely by a rally in miners on expectations that Prime Minister Julia Gillard would fail to form a government, spelling the end of her 30 per cent tax on major iron ore and coal mines. The conservatives have vowed to scrap the mining tax. The reversals in the Aussie and Australian stocks also followed a media report the country's largest brewer Foster's Group (FGL.AX) was selling its beer operations to SABMiller for about 7 billion pounds ($10.9 billion). Foster's shares rose as much as 6.5 per cent. Investors likely face a week's wait before they know who will form a national government and how independents will sway key policies like the mining tax and a planned broadband network. "There is the mining tax and the broadband issue but there are not too many economic differences," said Simon Burge at ATI Asset Management which oversees A$500 million. "But with no party having a clear majority it makes it hard for them to get any of their mandates through." Japan's benchmark Nikkei (.N225) was down 0.4 per cent adding to Friday's 2 percent fall as corporate performance jitters grew in the wake of the yen's strength against the dollar. "Governments around the world are allowing their currencies to weaken, and if Japan doesn't do anything about the strength in the yen it could appreciate further and that would put pressure on Japanese stocks," said Masahiko Sato, an executive director at Nomura Securities' equity marketing department. Investors are focused on whether central bank Governor Masaaki Shirakawa and Prime Minister Naoto Kan will meet to discuss any official action in the face of the yen's strength. News that Kan and Shirakawa talked over the phone on Monday about the currency and the economy and agreed to work closely, which came during the mid-day break, was unlikely to have a big impact as it remained undecided whether the two will hold a meeting. The dollar was down 0.3 per cent at 85.35 yen. The U.S. currency fell as low as 84.72 yen earlier this month, its lowest since July 1995. Investors expect Kan to pressure the central bank for action in the face of the yen's strength, but Jiji news agency reported the government is considering postponing the meeting, which had been expected on Monday, to avoid giving the impression that it is intervening in the BOJ's policy decisions. Meanwhile, the doubts about the global economic recovery weighed on investor sentiment. "A growing trend seems to be that signs of a weak global economic recovery are prompting some funds to close, and cash-out moves as a result of that are weighing on stocks. That money is likely flowing into US bonds and JGBs," said Hajime Nakajima, deputy general manager at Cosmo Securities. The MSCI index of Asia Pacific ex-Japan stocks eked out gains, rising 0.3 per cent and hauled up by advances in sectors such as resources and technology . Oil rebounded to above $74 a barrel but stayed close to six week lows amid concerns about a global economic recovery.
