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 The dollar remained broadly supported, trading around its highest
level since mid-November against a basket of currencies, with many
investors expecting the Fed to trim its bond buying further next
week.
"Investors started the year with an optimistic global economic
outlook. But so far, we haven't seen much in the way of additional
proofs for such optimism," said Daisuke Uno, chief strategist at
Sumitomo Mitsui Bank.
Japan's Nikkei was almost flat <.N225>, while MSCI's broadest index
of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> was off 0.1
percent.
Australian shares fell 0.8 percent <.AXJO>, extending losses after
an unexpectedly large spike in inflation reduced the prospects of a
rate cut, though the data also helped to lift the Australian
currency 0.6 percent to $0.8855.
In a mixed day on Wall Street the Standard & Poor's 500 Index <.SPX>
rose 0.28 percent and the Nasdaq Composite Index <.IXIC> gained 0.67
percent, while the Dow Jones industrial average <.DJI> fell 0.27
percent on disappointing earnings by three of its components.
The dollar index stood at 81.072 <.DXY>, having risen as high as
81.388 on Tuesday.
The euro traded at $1.3566, not far from a two-month low of $1.3508
hit on Monday while the yen stood at 104.30 yen, not far from a
five-year high of 105.42 yen hit on January 1.
The Bank of Japan is widely expected to keep its policy on hold on
Wednesday, although some investors are looking for signs of further
easing from its Governor Haruhiko Kuroda.
The Canadian dollar drooped near a four-year low ahead of a policy
announcement from the Bank of Canada later in the day, with many
traders speculating the bank could shift its policy bias from
neutral to easing.
The Canadian dollar traded at C$1.0967 per U.S. dollar, having
touched $1.1019 on Tuesday.
In contrast, investors expect the Fed to trim its monthly bond
buying by around $10 billion to $65 billion at its Jan 28-29
meeting, the last meeting under outgoing Chairman Ben Bernanke,
after it cut purchases by $10 billion in December.
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Such a move could unsettle emerging markets, as foreign investors
re-route funds back towards U.S. markets on further signs of a
healthier economy.
THAI BANK MEETS
The Thai central bank also meets on Wednesday and could cut rates to
shore up a sagging economy hit by months of political unrest,
putting renewed pressures on the Thai baht.
Bangkok has declared a 60-day state of emergency, saying it wants to
prevent any escalation of more than two months of protests aimed at
forcing Prime Minister Yingluck Shinawatra from power.
The baht stood little changed at 32.87 to the dollar, not far from a
four-year low around 33.13 hit earlier this month.
"Thai financial markets are relatively calm for now. But if the
political standoff drags on, then there will be delays in
infrastructure investment and larger economic implications," said
Yukino Yamada, senior strategist at Daiwa Securities.
Turkey, another emerging economy hit by political turmoil, saw its
currency plunge to a record low on Tuesday after its central bank
shied away from hiking interest rates, bowing to what many investors
see as pressure from a government bent on maintaining growth ahead
of elections.
(Editing by Richard Pullin and Shri
Navaratnam)
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