U.S. dollar and Asia stocks rebound but risks remain

By Kevin Plumberg

HONG KONG (Reuters) - The U.S. dollar rose broadly on Monday, hitting a two-year high against sterling, with a downtrend in commodity prices intact, leaving investors scurrying to buy back the currency and sparking a rebound in Asian stocks.

European stock markets were expected to open little changed, according to financial bookmakers, with volumes likely lower than average because of a public holiday.

Recent reports showing shrinking or no economic growth in Britain, the euro zone and Japan have boosted the attraction of the dollar as an alternative investment, especially with crude prices trading more than $30 below a record high hit in July.

A rally in the dollar stalled last week after hitting a six-month high against the euro, but an upward trend in the U.S. currency is seen intact.

Even billionaire investor and long-time dollar detractor Warren Buffett, chairman of conglomerate Berkshire Hathaway Inc, came to the currency's aid on Friday when he said in a television interview that he had no bets against the dollar.

"The combination of incremental weakness in the European economy and the lower oil prices should keep the pressure on euro/dollar in our view," Nizram Idris, currency strategist with UBS in Singapore, said in a note.

Asian stocks rebounded from a two-year low as the drop in oil prices back below $120 a barrel lifted shares of companies sensitive to energy prices, though trading volumes across the region were quite thin, suggesting a lack of conviction among investors.

Japan's Nikkei share average ended up 1.7 percent, after shares of Japan's second-largest car maker, Honda Motor Co, led the way higher.