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Asian Stocks Near 8-Month Highs, US Dollar Struggles

Asian stocks hovered close to eight-month highs Wednesday, pausing for breath after rallying on optimism that the global economy is through the worst, while the dollar struggled near its latest set of lows for the year.

However markets weren't powering away to the same degree they have done in recent sessions, with analysts still cautious about the strength of the economic foundations for the three-month long rally in shares and higher yielding currencies.

The Australian dollar rose to its highest against the U.S. dollar since late September. The greenback has been the prime loser in the risk-taking rally that has stoked multi-month peaks in major currencies as investors gained the confidence to branch out into markets other than safe-haven dollar-based ones. The dollar hit its weakest level this year against a basket of six major currencies Tuesday and was hovering just above that level on Wednesday. Oil succumbed to profit-taking after a six-day rally which took it to seven-month highs, with crude futures dipping towards $68 a barrel after data showed U.S. crude inventories fell less than expected last week.

Japan's Nikkei 225 Average finished up 0.4 percent, with resource- and chip-linked shares rising after a surprise surge in U.S. pending home sales added to hopes the global recession may be easing. Glassmakers such as Asahi Glass climbed after a slew of brokerage upgrades that cited long-term signs of hope for the economy.

South Korea's KOSPI ended just a touch higher led by shipbuilders including Samsung Heavy Industries on rising order hopes, but losses by banks such as KB Financial Group after capital-raising reports weighed.

Australian shares rose 1.6 percent to close at a fresh 7-month high after data showed Australia dodged recession in the March quarteras the economy expanded.

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Hong Kong shares rose 1 percent, clawing back some ground lost in the previous session, after data showed U.S. pending home sales for April grew, sparking hopes for economic recovery. Bulk shippers hit the spotlight after the key gauge for measuring changes in sea freight surged 11.5 percent overnight. The Baltic Dry Index jumped to an eight-month high, propelled by increased Chinese imports of iron ore. China Cosco,the country's biggest shipping conglomerate, rose 5 percent.

Singapore's Straits Times Index rose 0.3 percent with financial issues such as UOB and DBS Group, both more than 2 percent higher, leading the advance.

China's Shanghai Composite Index rose 2 percent. Shanghai Pudong Development Bank jumped after announcing a generous bonus share plan for 2008. Property sector leader China Vanke also advanced. Analysts said recent supportive steps by the government, including a cut in the minimum capital required to launch investment projects for low- and medium-cost housing, lifted expectations for earnings in the sector.