Australia shares narrow losses as attention shifts to high $US benefits

* Stocks narrow losses

* Concerns about high U.S. dollar, possible rate hike

* Stocks have given up gains since early Feb. (Adds analysis, quotes, stocks on the move)

SYDNEY/WELLINGTON, March 16 (Reuters) - Australian shares clawed back hefty early losses on Monday as investors looked past concerns about the impact of a higher U.S. dollar and pondered the likely positive impact on exporters.

Stocks fell nearly 1 percent in early trading after weak U.S. inflation data painted a downbeat picture of the economy while expectations of a rate hike kept the dollar higher, putting pressure on U.S. exporters.

Continuing weakness in oil and iron ore prices also weighed on Australian resources firms.

But by mid-session the losses had narrowed substantially as investors looked to a positive lead from Asia, where exporters hope to benefit from a more favourable foreign exchange rate.

"One man's currency loss is another man's currency gain," said CMC Markets chief market strategist Michael McCarthy.

"That strong U.S dollar is bad for U.S. companies, but it's a real positive for exporters across the Asia Pacific region."

By 0149 GMT the S&P/ASX 200 index was down 7.5 points or 0.1 percent at 5807.0. In the past month, the benchmark has risen 3.5 percent then lost the same amount.

Energy stocks led the market lower after U.S. crude fell to a 6-year low on a strong dollar and concerns America will run out of oil storage.

Woodside Petroleum (Xetra: WOPA.DE - news) was down 2.2 percent and Oil Search was 3.8 percent lower while Santos dipped 2 percent.

In the broader resources, BHP Billiton (NYSE: BBL - news) slipped 0.8 percent after the iron ore price remained at record lows. Rival Rio Tinto (Xetra: 855018 - news) firmed 0.3 percent.

Banks were higher, with Commonwealth Bank of Australia (Other OTC: CBAUF - news) up 0.6 percent, National Australia Bank 0.7 percent higher, and Westpac Banking Corp up 0.5 percent.

Telecommunications giant Telstra Corp declined 0.2 percent after smaller TPG Telecom said it plans to buy iiNet, creating the country's second largest broadband provider. iiNet was up 2 percent and TPG was down 4.5 percent.

New Zealand's benchmark NZX50 index rose 16 points or 0.3 percent to an all-time intraday high of 5,926.31, boosted by ongoing gains in accounting software firm Xero (Frankfurt: 0XE.F - news) , which hit its highest in nearly eight months.

Xero rose 3.5 percent to NZ$26.49, its highest since late July, on growing optimism about the fast-growing company's aggressive global expansion plans after it secured additional investment last month.

Sky Television New Zealand and specialised milk processor A2 Milk Company each gained 1.9 percent.

A2 was boosted after it said it received approval to list on the Australian stock exchange, which would improve trading liquidity.

(Reporting by Byron Kaye and Naomi Tajitsu; Editing by Eric Meijer)