Asian Shares Wobble As Investors Await Fed Meet, Dollar Dips

Tokyo: Asian shares were on tenterhooks on Tuesday as investors awaited the Federal Reserve's meeting that begins later in session for clues on the outlook for US monetary policy, while crude oil prices pulled back after their surge to 18-month highs.

MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.1 per cent in early trade, while Japan's Nikkei stock index slid 0.5 per cent as the dollar came off highs against the yen.

The US central bank is widely expected to hike interest rates for the first time in 2016 at a two-day meeting, with markets pricing in a nearly 100 per cent chance of a quarter percentage point increase to the Fed's target range of 0.25 to 0.50 per cent.

What matters most to investors is the Fed's statement and economic projections, which will be examined for any signs of reaction to Donald Trump's surprise victory in the November 8 US Presidential election.

"The big question is what sort of pace can we expect from the Fed for next year?" said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.

US Treasury yields have recently spiked on expectations that the Trump administration will enact policies to spark growth and inflation. In addition to these expectations, surging crude oil prices have also stoked inflation expectations.

On Monday, the yield on benchmark US 10-year notes touched 2.528 per cent, its highest since September 29, 2014. It stood at 2.460 per cent on Tuesday.

Higher yields in turn lifted the dollar, which climbed as high as 116.120 yen on Monday, its highest since early February. But it was last down 0.2 per cent at 114.83 yen.

"There is some profit-taking, particularly by US hedge funds, ahead of the Fed meeting and the upcoming Christmas holiday," Ogino said.

"But many Japanese importers are far behind in dollar-buying, so they would like to buy on dips, and the downside should be limited during Asian trading hours."

The euro edged up 0.1 per cent to $1.0649 , while the dollar index, which tracks the greenback against a basket of six rival currencies, was 0.2 per cent lower at 100.850.

Crude oil prices came off their highs after surging on Monday to their highest since mid-2015 on the back of a weekend deal by OPEC (Organization of Petroleum Exporting Countries) and non-OPEC producers to curtail output.

US crude futures slipped 0.4 per cent to $52.61 a barrel.