Strong Dollar Lifts Asian Markets, Japan Ends Higher

Asian markets closed mostly higher Monday, as a stronger U.S. dollar cheered investors and lifted exporters. Both Australia and Japan closed up with Australia gaining almost 1 percent.

The dollar climbed back towards a two-month high versus a basket of currencies as signs of economic weakness in Australia and New Zealand showed the global slowdown spreading, a shift that is expected to help buoy the battered U.S. currency.

U.S. light sweet crude rose to an all-time peak above $126 a barrel on Friday, stoking worries about inflation and slowing consumer spending. Record-high oil prices are weighing on cost-sensitive airline stocks such as Japan Airlines and Qantas.

In focus down under -- merger talks between Westpac Banking Corp and St George Bank.  A successful marriage between the two will create Australia's largest home lending and wealth management provider.

Tokyo's Nikkei 225 Average climbed 0.6 percent to its first positive close in three days, boosted by a retreat of the yen against the dollar that helped exporters and by gains in Nippon Oil and other oil-linked firms as oil hovered near record levels. Additional upward energy came from Konica Minolta, which surged 12.14 percent for its greatest one-day percentage gain in more than seven years, while financials such as Mitsubishi UFJ Financial Group lost ground on rekindled worries about the financial sector in the United States.

Australian shares rose nearly 1 percent to 3-1/2-month highs as news Westpac Banking
Corp was in takeover talks with St George Bank lifted banks such as National Australia Bank.

Singapore's Straits Times Index swung into positive territory. First Resources rose 7.1 percent after Citigroup said in a broker note it expects the firm to post a strong first-quarter net profit.

China's Shanghai Composite Index moved back into the black, closing 0.4 percent higher, despite fears that rising inflation might soon prompt officials to take economic cooling steps, after the release of consumer price data showing inflation rose to 8.5 percent in April. Property developers, which are most vulnerable to monetary tightening, fell. Vanke, China's largest listed developer, slumped over 4 percent. Financial shares were mixed with Industrial & Commercial Bank of China, the country's biggest lender, edging higher.

Markets in South Korea and Hong Kong are closed for a holiday. They will reopen Tuesday.

© 2008 CNBC.com