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Asia stocks rise as Ukraine tensions ease for now


 TOKYO (Reuters) - Asian stocks rose on Monday as tensions eased slightly in Ukraine, while the dollar held steady against the safe-haven yen after rebounding sharply late last week.

Spreadbetters expected the upbeat momentum for equities to continue into Europe, with Britain's FTSE (.FTSE) seen opening as much as 0.6 percent higher, Germany's DAX (.GDAXI) up 1 percent and France's CAC (.FCHI) 0.8 percent higher.

U.S. stock futures (ESc1) also pointed to a modestly firmer opening later in the day.

Wall Street surged on Friday after Russia said it had finished military exercises in southern Russia, which the United States had criticised as a provocative step amid the Ukraine crisis.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 1 percent, more than making up for Friday's 0.9 percent drop when geopolitical woes buffeted risk markets.

Tokyo's Nikkei (.N225) rose 2.2 percent, and also was helped as the yen's sharp rally against the dollar on Friday was reversed. The index had lost 3 percent on Friday.

But investors remained wary with tensions persisting in other global hotspots such as Iraq, marked by an increasing death toll and new U.S. air strikes.

"We are seeing investor sentiment caught between positive U.S. economic fundamentals and psychological negatives, like geopolitical risk. Investor sentiment is easily swayed in such a situation, which could lead to higher volatility and market turbulence," said Koji Fukaya, president at FPG Securities in Tokyo.

The dollar, which suffered heavy losses against the yen last week after U.S. President Barack Obama authorised air strikes in Iraq, was steady after rebounding sharply late Friday as the Ukrainian news arrested the slide in U.S. Treasury bond yields.

Some observers saw the correlation between lower Treasury yields and weaker dollar loosening amid the latest phase in geopolitical tensions.

Kathy Lien, managing director at BK Asset Management, said heightened geopolitical uncertainty makes Treasuries more attractive to investors and central banks looking to park their money in such safe havens, with their demand supporting the greenback.

"Geopolitical uncertainty is clearly driving risk appetite and the conflicts abroad have made U.S. assets very attractive," she wrote in a note to clients.

The dollar was up 0.1 percent at 102.14 yen (JPY=) after touching a low of 101.51 on Friday.

The euro stood little changed at $1.3401 (EUR=).

The benchmark U.S. Treasury 10-year note yielded 2.436 percent, having pulled back from a 14-month low of 2.349 percent struck Friday.

In commodities, London copper edged up as appetite for risk grew following the move by Russia, while optimism over the outlook for China's economy underpinned demand.

Three-month copper on the London Metal Exchange (CMCU3) climbed 0.5 percent to $7,030.00 a tonne.

Gold was off to a muted start to the week as equity markets firmed, but the safe-haven metal held above $1,300 an ounce threshold as the geopolitical situation in the Middle East remained tense. [GOL/]

Spot gold (XAU=) was flat at $1,307.20 an ounce after hitting a three-week high of $1,322.60 on Friday.

Brent crude hovered above $105 a barrel on Monday, dropping from a one-week high hit on Friday, as U.S. intervention in Iraq eased concerns over the risk of disruption to supply from OPEC's second-largest producer