TOKYO: Asian shares edged higher while the euro steadied on Tuesday, but prices were capped as investors waited for the US Federal Reserve's policy decision later this week and any progress in US budget talks.
MSCI's broadest index of Asia-Pacific shares outside Japan nudged up 0.2 percent. The index has hit successive 16-month highs for the past four sessions.
Australian shares gained 0.4 percent to their highest in nearly two months on a strong resources sector, which was supported by a rise in metals and oil prices and hopes for the Fed to further ease monetary policy.
Hong Kong shares rose 0.4 percent to a 16-month high but Shanghai shares fell 0.5 percent.
"The market continues to trade sideways in an environment where headlines seem to have lost bite. Poor liquidity conditions as we approach the end of the year seem to keep portfolios on a tight leash around their benchmarks," said Barclays Capital analysts in a research note.
Japan's Nikkei share average was the region's other laggard, slipping 0.3 percent to around 9,506 as investors became cautious over signs that the market is overbought after a 10 percent rally in the past month and took profit on export-focused firms.
"The 9,500-level is still an important psychological line for both support and resistance purposes," said Yutaka Miura, a senior technical analyst at Mizuho Securities.
US Treasury prices edged higher on Monday on worries about US budget wrangling, Italy's political rumbling and expectations of further monetary easing by the Fed.
At the end of the two-day meeting which begins on Tuesday, the Fed is expected to announce it will buy $45 billion per month of longer-dated Treasuries beginning in January to replace the current Operation Twist programme, which expires at the end of December.
Under the programme, it sells shorter-dated US government debt and buys longer-dated Treasuries to extend the duration of its balance sheet.
Such views weighed on the dollar and helped to underpin the euro, which traded at $1.2937, off Monday's low of $1.2880.
The dollar firmed 0.1 percent to 82.40 yen as the yen has also been pressured by expectations for more easing from the Bank of Japan, which meets next week.
The euro was also supported as Italian Prime Minister Mario Monti played down market fears over his decision to resign, saying there was no danger of a vacuum ahead of an election in the spring.
"I think people at this point are not sure whether there really will be the risk of Italy not pursuing its fiscal reforms pursued under Monti. So it's hard to really price that news in yet," said Takao Hattori, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.
Center>Copyright Reuters, 2012
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