Asian shares turned higher on Tuesday, reversing earlier losses on the back of gains in Hong Kong and China, while the dollar extended highs scaled in holiday-thinned trading in the previous session.

European shares marked a weak finish in thin trade on Monday, with many markets in the region closed for holidays. US markets were also closed for Memorial Day.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5 per cent, after eking out a late gain in the previous session. Australian shares were up 0.8 per cent.

Hong Kong’s Hang Seng index jumped 1.5 per cent, flirting with seven-year highs, on expectations of more money inflows from the mainland following Beijing’s fresh moves to expedite cross-border investment.

Mainland bourses also rose, with the CSI300 Index adding 0.9 per cent and the Shanghai Composite Index rising 1.1 per cent, both to fresh seven-year highs

China had announced over the week-end that it would allow funds domiciled in Hong Kong and China to be sold in each others’ market starting July 1, in Beijing’s latest step to facilitate cross-border investment.

Japan’s Nikkei stock index was nearly flat, taking a breather after a run of seven straight gains and closing at a fresh 15-year high on Monday.

“Whether it’s a political risk in the euro zone, volatility in the bond market or the timing of a US rate hike, we can’t ignore these risks,’’ said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, explaining why investors might unwind some bullish positions and take profits at the current lofty levels.

Dollar at 1-month high

The dollar hit a fresh one-month high against a basket of major currencies, extending a rally triggered by Friday’s comments from Federal Reserve Chair Janet Yellen, who rekindled market expectations that the central bank was gearing up to hike interest rates.

Yellen said she expected economic data to strengthen and noted that some of the US economy’s weakness at the start of the year might be due to “statistical noise’’.

The dollar index rose as high as 96.714, and was last up about 0.6 per cent at 96.566.

Fed Vice Chair Stanley Fischer had said in Israel on Monday that too much importance was being placed on the central bank’s first rate hike, and that the process of returning to more normal levels of interest rates will take a few years.

While markets largely expect the first rate hike in September, it will be determined by data and not by date, he said.

US economic data

Investors await the latest batch of US data later on Tuesday that could provide more clues on the strength of economic recovery, including May durable goods and April consumer confidence.

Greece debt crisis

Greece’s debt crisis kept pressure on the euro. Time is running out for Greece to reach an agreement on reform with lenders and there will be no further funds for Athens without it, the head of the European Stability Mechanism, Klaus Regling, told Germany’s Bild newspaper on Tuesday.

“The Greek political saga will remain in the spotlight as the deadline for payments to the IMF approaches,’’ strategists at Barclays wrote in a note to clients.

“A light data calendar and continued political uncertainty in Greece should continue to weigh on EUR,’’ they said.

The euro was down about 0.2 per cent at $1.0952, breaking below its overnight nadir and wallowing at its lowest levels since late April.

The dollar added about 0.1 per cent against the Japanese currency to 121.71 yen after rising as high as 121.79 yen, its highest since March 10.

Crude oil was steady, after marking gains in Monday’s thinned trading as firm global demand offset the effects of a stronger dollar.

Brent crude was nearly flat at $65.50 a barrel, while US crude added 0.2 per cent to $59.81.

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