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GLOBAL MARKETS-Strong Japanese stocks close in on 5-1/2 year peak as yen stumbles

Dominic Lau
Wednesday, 27 Nov 2013 | 7:34 PM ET

stumbles@

* Yen slips to 6-month low vs dollar, Nikkei rises 1.3 pct

* Asian shares up 0.2 pct, underperforming vs Japan stocks

TOKYO, Nov 28 (Reuters) - Japanese stocks charged towards a 5-1/2 year peak on Thursday after the yen fell sharply on the back of relatively positive U.S. economic data, while other regional share markets edged modestly higher.

U.S. jobless claims unexpectedly fell last week and the Thomson Reuters/University of Michigan consumer confidence improved from a preliminary reading, while the Chicago PMI held up better-than-expected in November after surging in the previous month.

A soft October durable goods report was the only dent to an otherwise upbeat set of figures.

"The U.S. economic data were very pro-tapering, despite the weakness in the durable goods data," Steven Englander, global head of G10 FX strategy at Citigroup, wrote in a note.

Investors are focusing more closely on data as they weigh the odds of when the Federal Reserve is likely to begin dialling back its $85 billion-a-month bond-buying campaign. Many investors expect the Fed will begin tapering in the first quarter of next year if the economy continues to improve.

"On tapering and USD, we have been struck by how much of the market continues to assign a very low probability of a December or January tapering," Englander said.

"Investors are focused on next week's labour market release, but the stronger than expected data suggests that some revision of probabilities is merited even going into the numbers."

The dollar hit a six-month high against of 102.28 yen , edging closer to a 4-1/2 peak of 103.74 yen reached in May.

As the yen tumbled, Tokyo's Nikkei benchmark climbed 1.3 to 15,646.94, closing in on a 5-1/2 year peak of 15,942.60 reached in May.

Investors have been using the yen as a funding currency for carry trades with the Bank of Japan committed to keeping ultra-loose monetary policy to shore up growth -- a contrast with the Fed which is moving towards a turn in policy.

On Wednesday, BOJ board member Sayuri Shirai said the BOJ should consider expanding monetary stimulus even further if economic and price growth sharply deviates from its projections.

MSCI's broadest index of Asia-Pacific shares outside Japan added 0.2 percent, though it faced resistance at its 50-day moving average.

The Dow Jones industrial average and the Standard & Poor's 500 closed at record highs on Wednesday, while the tech-heavy Nasdaq finished at a 13-year peak. U.S. markets will be closed on Thursday for the Thanksgiving holiday.

The dollar was steady at $1.3571 to the euro, having hit a four-week low in the previous session after news that Germany's two major parties had formed a grand coalition deal.

Among commodities, U.S. crude prices eased 0.1 percent to around $92.20 a barrel, adding to a 1.5 percent slide overnight as a higher-than-expected build in inventories weighed down prices.

Gold stabilised at about $1,237.8 an ounce, having fallen 0.4 percent in the previous session and not far from a four-month low of $1,227.34 touched on Monday.