By Hideyuki Sano

TOKYO (Reuters) – The prospects of higher U.S. interest rates buoyed the dollar but also kept share prices in many countries in check on Thursday, with Asian stocks hovering around seven-week lows.

The dollar’s index against a basket of six major U.S. trader partners hit a 12-year high of 99.985 on Wednesday and last stood at 99.689. <.DXY> <=USD>.

MSCI’s broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> was up 0.1 percent in early Asian trade but still not far from seven-week low hit the previous day.

Japan’s Nikkei <.N225> rose 0.4 percent, bolstered by hopes of buying from public investors such as the government’s pension fund.

Surprisingly strong U.S. employment data published on Friday fuelled expectations that the Federal Reserve may raise interest rates as soon as in June, though some investors and analysts fear the economy is still not resilient enough to cope with even marginally higher borrowing costs.

In contrast, the European Central Bank started its 1 trillion euro bond buying programme, unveiled in January, this week.

The policy divergence prompted many market players to shift funds to higher-yielding U.S. dollar from euro.

The euro fell to a 12-year low of $ 1.0511 on Wednesday and last stood at $ 1.0546 .

The common currency has fallen 4.8 percent in the past five sessions — a scale of decline that the currency did not see even in rough times during the European debt crisis in 2011-12.

The sharp fall in the euro is boosting shares in euro zone shares, with major stock indexes for Germany <.GDAXI>, France <.FCHI> and Italy <.FTMIB> all rising more than 2 percent on Wednesday.

In contrast, the dollar’s strength undermined U.S. shares on concerns it would erode earnings for multinationals. The S&P 500 Index <.SPX> fell 0.2 percent to a one-month low.

The dollar’s strength and the spectre of higher U.S. rates also unsettle many emerging markets that have benefited from funds escaping low yields in the United States.

Indeed, currencies such as the Turkish lira and the South African rand have fallen almost as much as the euro so far this month. The Brazilian real fell even about twice as much as the euro.

“We should take note of the risk that emerging currencies could fall further. … Some emerging countries are running current account deficit and their currencies fall would be negative for risk asset markets,” Makoto Noji, senior strategist at SMBC Nikko said in report.

U.S. crude prices hit a one-month low of $ 47.33 per barrel on Wednesday after government data showed a U.S. oil inventory build last week, contrary to some expectations for a drawdown. It last stood at $ 48.31.

The European benchmark Brent also hit a one-month low, though it bounced back later on Wednesday.

(Editing by Kim Coghill)