April 15 (Reuters) - A look at the day ahead in Asian

markets.

Asian markets are set to open on the defensive on Monday, with

heightened tensions in the Middle East spurring strong demand

for safe-haven assets like the dollar, gold and U.S. Treasuries

at the expense of stocks and local currencies.

Investor sentiment was already veering towards the negative

following the U.S. bank earnings-driven equity market slump on

Friday - JP Morgan shares had their biggest fall in almost four

years and world stocks lost the most in six months.

U.S. stock futures are pointing to another steep decline at

the open on Monday, so it's likely Asian bourses will follow

suit. Oil prices, which hit a six-month high on Friday, are

likely to make further gains on Monday.

In such a febrile environment local Asian economic

indicators and events are likely to take a back seat. Monday's

calendar is pretty light, with only Indian trade and wholesale

price inflation data, and Japanese machinery orders on tap.

China's first-quarter GDP on Tuesday and Japanese consumer

price inflation figures on Friday are the two economic

indicators from Asia that could most move local markets this

week.

But for Monday at least, investors will be focused on

reducing risk and playing it safe, and in that regard, there

could be some big movement in the Japanese yen.

The yen is traditionally seen as a 'safe-haven' asset that

does well in times of heightened risk aversion, boosted by large

repatriation flows from Japanese investors and short covering

from currency traders using the yen to fund carry trades.

And there is a large short position to cover - the yen is at

a 34-year low below 153.00 per dollar and the latest U.S.

futures market data show hedge funds' net short yen position is

the biggest in 17 years.

To the surprise of many, Japanese authorities have not yet

intervened to stop the rot, despite the near-daily warnings from

officials that "excessive volatility is undesirable" and that

Tokyo stands ready to respond to sharp currency swings.

Perhaps Tokyo has not yet intervened because the yen's slide

is fully justified on "fundamental" grounds - U.S. yields and

implied rates are rising faster than their Japanese equivalents

because U.S. growth and inflation rates are higher than Japan's.

The strong dollar and recent spike up in U.S. bond yields,

however, pose potentially significant problems for Asia. They

represent a tightening of financial conditions and make

servicing dollar-denominated debt more expensive.

A sharp fall in Treasury yields as investors scramble to

reduce risk in their portfolios due to intensifying geopolitical

tensions is unlikely to offer much comfort.

Here are key developments that could provide more direction

to markets on Monday:

- India trade (March)

- India wholesale price inflation (March)

- Japan machinery orders (February)