* MSCI Asia ex-Japan pauses, Nikkei off 52-month highs
* Yen selling takes break, euro buying momentum slows
* ECB policy decision, Draghi comments awaited
* Industrial metals underpinned near multi-month highs
* European shares seen flat to slightly up
By Chikako Mogi
TOKYO, Feb 7 (Reuters) - Asian shares and the euro paused
from recent gains on Thursday, as investors awaited the European
Central Bank's policy meeting later in the day and President
Mario Draghi's view on euro zone growth prospects, optimistic
that the worst may be over.
"Risk assets traded heavily as market participants exercise
caution ahead of the ECB, particularly with Europe's political
crisis hampering sentiment," said Stan Shamu, market strategist
at IG Markets. "There has been growing talk of currency wars
lately and some are now saying the eurozone will soon consider a
fixed rate for the single currency."
European markets are seen in tight ranges, with financial
spreadbetters predicting London's FTSE 100, Paris's
CAC-40 and Frankfurt's DAX would open flat to
up 0.1 percent. A 0.1 percent drop in U.S. stock futures
suggested a soft Wall Street start.
Japan's Nikkei stock average ended down 0.9 percent,
retreating from its highest level since October 2008 that it
scaled on Wednesday as investors took a break from selling the
But shorter-dated Japanese government debt rallied, sending
5-year government bond yields to a record low of 0.135 percent
and 5-year yields to their lowest
since September 2002 at 0.030 percent, on expectations that the
central bank will cut interest rates to zero.
The yen's broad weakness has been driven by expectations for
radical reflationary policy from the Bank of Japan, under Prime
Minister Shinzo Abe's push for a mix of anti-deflation policies.
"Hopes for 'Abenomics' are supporting the mood, but
investors are also sensitive to the currency moves, so right
now, even slight uncertainty on Europe can be a reason to pull
back," said Hiroichi Nishi, an assistant general manager at SMBC
The MSCI's broadest index of Asia-Pacific shares outside
Japan was down 0.1 percent near a one-week low,
after reaching a 18-month high on Monday.
Shanghai shares were set to break an eight-day
rising streak, as investors booked profits on Chinese financials
after the central bank stressed the need to tackle inflation and
speculative housing demand.
Australian shares gained 0.3 percent, outperforming
their Asian peers, on a rise in index heavyweights National
Australia Bank and Telstra Corp which reported higher earnings.
Australian headline job figures for January beat market
Recent data suggesting a moderate global economic recovery,
even if it lacked strong momentum, underpinned industrial
metals, keeping London copper prices near four-month
highs and platinum and palladium near their
highest level in 17 months on hopes of improved demand.
Data from deflation-swamped Japan was also positive, with
the country's core machinery orders surging unexpectedly in
December for a third straight month of increases, with firms
expecting further improvement in the first quarter.
But analysts said Asian economies were still relying on
exports to power their way to growth.
"One of the pillars of our bullish view on Asian currencies
at the start of the year was the theme of global rebalancing, in
which Asian economies would move away from export-dependent
growth models towards a more domestic demand-driven model,
allowing their currencies to appreciate to dampen their export
competitiveness in favour of stronger terms of trade," said
Morgan Stanley in a research note.
"However, Asian economies have been slower in the
rebalancing process than we had envisioned, as seen by the heavy
physical and verbal FX intervention this year."
FATE OF DRAGHI MAGIC
Growing optimism that the euro zone economy may be nearing a
bottom has propelled the euro to a 14-1/2-month high against the
dollar, a 34-month peak against the yen and
15-month top on sterling.
The ECB is expected to keep interest rates at a record low
0.75 percent at later on Thursday. Traders will focus on any
comments about the euro's recent strength as well as the bank's
view on the euro zone economy.
Vassili Serebriakov, strategist at BNP Paribas, said the ECB
will likely reason that the euro's strength is due to real
improvement in the financial markets and economic outlook, and
thus does not warrant immediate action.
Draghi's strong verbal commitment to defend the euro and the
ECB's new bond-buying scheme to help ease funding strains in
highly-indebted euro zone members had significantly reduced
risks of the region crumbling under the weight of its debt woes.
But a corruption scandal in Spain and uncertainty over the
outcome of an Italian election later this month brought market
focus back to the region's potential political instability.
"The scandal stirs memories of past scandals, and there's
the possibly that it, too, could become a bigger matter, so this
is making some investors cautious," said Kimihiko Tomita, head
of forex at State Street in Tokyo.
The euro steadied around $1.3526, off a 14-1/2-month
high against the dollar of $1.3711 hit last week.
The dollar eased 0.1 percent to 93.57 yen after
touching 94.075 yen, its highest since May 2010 on
Wednesday. The euro steadied at 126.60 yen, off
Wednesday's 127.71 yen, its strongest since April 2010.
U.S. crude rose 0.1 percent to $96.76 a barrel and
Brent also added 0.2 percent to $116.90.