Asian Shares, Dollar Tread Cautiously Ahead of Fed Meeting

Tokyo: Asian shares were modestly higher while the dollar held steady on Tuesday, as investors awaited the outcome of the US Federal Reserve's two-day meeting that begins later in the session for clues to the direction of US interest rates.

MSCI's broadest index of Asia-Pacific shares outside Japan shrugged off early losses and a lacklustre performance on Wall Street to rise about 0.3 per cent.

But Japan's Nikkei stock average extended losses, shedding 0.8 per cent on concerns over corporate earnings after disappointing results from Canon Inc, despite upbeat economic data released before the market open.

Japanese retail sales in September rose 2.3 per cent from a year earlier, government data showed, suggesting consumer spending is gradually picking up.

"Positive retail data is helping some retail stocks, but not strong enough to affect the whole market as investors are focused on the big overseas event now," said Takuya Takahashi, a strategist at Daiwa Securities.

The Fed is expected to announce the completion of its quantitative easing programme and will likely reinforce its stated willingness to wait a long while before hiking interest rates after a volatile month in financial markets.

"With the end of the asset purchase programme a foregone conclusion, speculation is once again mounting about the movement of interest rates," said Evan Lucas, market strategist at IG.

Data on Monday showed US services sector activity slowed in October to a six-month low, while manufacturing output in Texas decreased, providing more evidence that the Fed has reason to wait before raising US interest rates.

The US dollar steadied after slipping overnight on expectations of more dovish comments from the Fed.

The dollar index, which tracks the US unit against six major rivals, was steady at 85.502.

The dollar was flat on the day against its Japanese counterpart at 107.81 yen, but remained below Monday's nearly three-week high of 108.38.

The greenback inched up about 0.1 per cent against the euro to $1.2711.

Germany's closely watched Ifo report of business sentiment on Monday showed the index hit its lowest level in almost two years in October, indicating that Europe's largest economy faces challenges.

US crude for December was down about 0.5 per cent at $80.59 per barrel after dropping as low as $79.44 on Monday, its lowest level since June 2012, after Goldman Sachs cut its price forecasts. Concerns about weak global demand and booming supply continued to loom over the market.

Spot gold recouped earlier losses to rise 0.2 per cent to $1,228.60, pulling away from two-week lows.

Copyright: Thomson Reuters 2014