Asia shares eke out 19-month high, dollar holds firm

Investors are reflected in a window as they talk in front of a board displaying stock prices at the Australian Securities Exchange in Sydney, Australia

* Talk of US policy stimulus whets appetite for risk

* Asia shares trying to rally for fifth session

* China inflation picks up, lessens global deflation danger

* Dollar bid as Treasury yields rise, Fed’s Yellen awaited

* Copper and iron ore in demand, oil steadies after slip

By Wayne Cole

SYDNEY, Feb 14 (Reuters) – Asian shares inched to 19-month
highs on Tuesday as the potential for economic stimulus in the
United States lifted the dollar, bond yields and Wall Street
stocks.

The dollar was also bolstered by speculation the head of the
Federal Reserve would underline the prospects of more U.S. rate
hikes when she testifies to Congress later on Tuesday.

Helping sentiment was data showing consumer and producer
prices were rising in China and thus reducing the danger of
deflation across the globe.

MSCI’s broadest index of Asia-Pacific shares outside Japan
edged up 0.1 percent, trying for its fifth
straight session of gains.

Japan’s Nikkei eased 0.1 percent as it struggled
with stiff chart resistance that has held since mid-December.
Stocks in Shanghai were barely changed, but Australia
managed a 0.4 percent gain.

Wall Street indexes had hit historic peaks on Monday, with
the benchmark S&P 500’s market value topping $20 trillion as
investors bet tax cuts promised by President Donald Trump would
boost the economy.

The Dow rose 0.7 percent, while the S&P 500
gained 0.52 percent and the Nasdaq 0.52 percent. Apple
, a component of all three indexes, rose 0.9 percent to
close at a record high for the first time since 2015.

The dollar gained on a basket of currencies 101.020, near
its strongest since Jan. 20, while the euro was down for the
fourth session in a row at $1.0596.

The dollar scored a two-week top on the yen following
reports that Trump did not discuss the currency or its strength
during weekend talks with visiting Japanese Prime Minister
Shinzo Abe. The dollar was last at 113.72 yen.

PARSING FED POLICY

All eyes are now on Fed Chair Janet Yellen’s semi-annual
testimony on policy due on Tuesday and Wednesday.

Tom Porcelli, chief U.S. economist at RBC Capital Markets,
believes Yellen will outline the case for at least three rate
rises this year, rather than the two the market implies.

One thing investors will be watching is how forceful Yellen
is in keeping alive the risk of a hike in March, something the
market has priced as a distant chance <0#FF:>.

Dallas Fed President Robert Kaplan on Monday argued it
should move soon to avoid falling behind the curve, especially
as fiscal policy could drive faster growth and inflation.

“Given the uncertainty of timing on the fiscal agenda and
the relatively modest uptick in inflation thus far this year, we
think it will be difficult for the committee to get enough
members onboard for a hike in March,” said Porcelli at RBC.

“But Yellen could certainly move the ‘perception’ needle on
this.”

In commodity markets, metals were on a tear thanks to supply
disruptions and strong Chinese demand. Copper hit its
highest since May 2015 after shipments from the world’s two
biggest copper mines were disrupted.

Iron ore climbed to its since August 2014 amid reports China
plans to cut steel capacity by at least half in 28 cities across
five regions during the winter heating season.

Oil recouped some ground on OPEC-led efforts to cut output,
though rising production elsewhere kept prices to a narrow range
that has contained them so far this year.

U.S. West Texas crude added 13 cents to $53.06 a
barrel, having shed 1.7 percent overnight. Brent futures
rose 15 cents to $55.74 a barrel.

(Editing by Sam Holmes)

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