SINGAPORE, Dec 23 (Reuters) - Asian stocks stepped back in subdued trade on Friday as Wall Street took a breather from its relentless rise since the U.S. election, while the dollar hovered below the 14-year high set earlier this week.
MSCI's broadest index of Asia-Pacific shares outside Japan , which touched a five-month low on Thursday, eased 0.3 percent, heading for a weekly drop of 1.6 percent in its second consecutive week of declines.
China's CSI 300 index extended losses to 0.5 percent, on track to lose 0.8 percent for the week. Hong Kong's Hang Seng retreated 0.5 percent, poised to end the week down 0.5 percent.
Japan's Nikkei, closed for a holiday on Friday, is up 0.1 percent for the week. The index has posted seven straight weeks of gains, its longest winning streak since early 2013, boosted by the yen's weakness in the face of a surging dollar.
Overnight, U.S. equities posted their first back-to-back daily declines of the month in light trading ahead of the Christmas weekend. U.S. indices fell as much as 0.4 percent on Thursday.
"Santa has taken a leave of absence into the end of the week," Jingyi Pan, market strategist at IG in Singapore, wrote in a note. "Asian indices could remain depressed into the end of the year."
Wall Street stocks have been on a tear since the U.S. election on expectations that Donald Trump's promised fiscal stimulus will boost economic growth and company profits. The Dow Jones Industrial Average has surged 8.7 percent since before the election results were announced.
Markets globally appeared be on pause for the holidays, with the MSCI World index down 0.16 percent on Thursday, and little changed on Friday.
Europe's STOXX 600 index closed down 0.2 percent on Thursday, with the broader downtrend offsetting optimism on hopes of a government bailout for troubled Italian lender Monte dei Paschi di Siena.
Early on Friday, the Italian government approved a rescue of the world's oldest bank, after it failed to raise enough money from private investors to stay afloat.
Prime Minister Paolo Gentiloni told reporters his cabinet had authorised the creation of a 20-billion-euro ($21 billion) fund to prop up Italy's embattled banking sector, with Monte dei Paschi expected to be first in line for help.
In the foreign exchange markets, the dollar was subdued having scaled its highest point since December 2002 on Tuesday. It has since hovered below that level, with traders unwilling to make any big moves ahead of the holiday weekend.
The dollar index, which tracks the greenback against a basket of six global peers, was little changed at 103.05, down from Tuesday's 103.65 peak. It is poised to end the week 0.1 percent higher.
The dollar inched down 0.1 percent against the yen to 117.49, set for a 0.4 percent loss for the week.
Still, most traders retain positive bets on the U.S. currency, particularly after upbeat economic data including business spending, and an upward revision to third-quarter economic growth on Thursday.
"The trend is definitely for a stronger dollar," Stephen Casey, senior currency trader at Cambridge Global Payments in New York. "Any dip in the dollar will a buying opportunity."
The euro edged up 0.1 percent to $1.0435 on Friday, narrowing its weekly loss to 0.1 percent.
Sterling was little changed at $1.228, on track for a weekly slide of 1.6 percent.
Oil prices slipped as investors took profits after Thursday's gains driven by strong U.S. economic data and optimism that crude producers would keep to their pledge to limit output.
U.S. crude retreated 0.6 percent to $52.65 a barrel on Friday, but remains on track for a 1.45 percent gain for the week.
As risk appetite ebbed on Friday, the decline in gold prices, which have languished in the wake of the dollar's rally, reversed. Spot gold climbed 0.2 percent to $1,130.51 an ounce, shrinking its weekly loss to 0.3 percent.