Asia Shares Give up Early Gains, Yen Slides

HONG KONG (Reuters) - Asian shares gave up early gains on Friday, with interest rate speculation pressuring assets in South Korea and China, while a bounce in the British pound continued to depress the yen and oil hit a one-year high above $78.

European stock futures were up 0.4 percent and the euro hit a fresh 14-month high against the dollar at $1.4968, while U.S. equity futures were 0.1 percent higher.

The yen, which lost more than 1 percent in New York trade, continued to suffer from a rebound in sterling as a short-covering squeeze on Britain's currency spilled into cross/yen pairs.

The squeeze was triggered by comments from Bank of England policy maker Paul Fisher that he felt more confident the bank's quantitative easing program was working well. The pound jumped to as high as 148.79, a three-week high, after rallying 3 percent on Thursday.

"An increasingly positive mood on the global economy has been supporting higher-yielding currencies. While the yen is not one of these currencies, it had been firming, and now we are seeing some correction," said Ayako Sera, market strategist at Sumitomo Trust & Banking in Tokyo.

Upbeat U.S. earnings reports on Thursday from financial giants Goldman Sachs and Citigroup bolstered hopes the U.S. economy is picking up, along with results from tech stalwarts Google Inc and IBM , which reported earnings that exceeded already high expectations, showing demand from both consumers and businesses was returning.

Asian shares were initially buoyed by the earnings news, but succumbed to profit taking ahead of the weekend and on growing concerns that interest rates in parts of the region could rise sooner than expected, potentially dampening a corporate earnings recovery.

The MSCI index of Asia Pacific stocks traded outside Japan <.MIAPJ0000PUS> was down 0.3 percent by midafternoon, while the Thomson Reuters index of regional shares <.TRXFLDAXPU> was off 0.2 percent.