Asian shares steady amid caution before Fed decision

TOKYO (Reuters) - Asian shares steadied in choppy trade on Thursday ahead of the U.S. Federal Reserve's decision later in the day, as investors remained cautiously optimistic for further stimulus action to bolster the world's largest economy.

Commodities from oil to gold were also held in tight ranges as investors awaited the Fed decision expected to be released at 2:30 p.m. EDT, followed by Chairman Ben Bernanke's news conference about two hours later.

"Some longs prefer to take profit ahead of the (Fed) meeting, since they've already made money on their positions and because there is always a chance that the Fed won't start another round of quantitative easing - even if many people expect it," said a Shanghai-based trader with an international firm.

MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> was barely changed after earlier easing as much as 0.2 percent and inching up as much as 0.2 percent. Australian shares <.axjo> lagged with a 0.3 percent fall.

"There's no true indication on why the market should be selling off today but they're all a bit quiet ahead of that (decision)," said Juliana Roadley, market analyst at Commonwealth Securities, of the Australian stock market.

"I think major investors just don't want to get in ahead of this major announcement," said Roadley.

Japan's Nikkei average <.n225> rose 0.5 percent.<.t/>

The dollar suffered from expectations for QE, which would be equal to printing money and diluting the value of the dollar, with the dollar index <.dxy> measured against a basket of key currencies sticking near a four-month low. The dollar hovered near a 3-1/2 month low against the yen of 77.70.

"We expect the US dollar to emerge weaker both on the day and multi-day/week on delivery of QE. Westpac leans towards purchases of mortgage-backed securities, quite possibly 'unlimited' (reviewed meeting by meeting)," said Sean Callow, senior currency strategist at Westpac in Sydney.

A Reuters poll showed economists raised their bets of a third round of Fed bond buying known as quantitative easing (QE) to 65 percent from 60 percent in August.

Masafumi Yamamoto, chief FX strategist at Barclays, said whether the size of Fed's monthly bond purchase would exceed the pace under the previous QE of $75 billion would be important, regardless of whether the program is open-ended or not.

Asian credit markets steadied, with the spread on the iTraxx Asia ex-Japan investment-grade index little changed and pinned at its tightest level since August last year.

Several Asian central banks will make interest rate decisions this session. South Korea's central bank unexpectedly held interest rates steady at 3 percent on Thursday to give it time to assess whether a euro-zone bond-buying program will help allay Europe's financial crisis.

GERMAN RULING BOOSTS EURO

Sentiment was underpinned by some positive development in the euro zone after a German constitutional court ruling on Wednesday gave a green light for Germany to ratify the euro zone's new rescue fund and budget pact, with some conditions, paving the way for Europe to proceed with its bailout schemes, bolstering the euro.

The ruling comes as the European Central Bank decides to buy short-term bonds of states that apply for bailout and abide by strict conditions, and the European Union proposes a single euro zone banking supervisor, in a concerted effort to preserve the common currency bloc.

Early results on Thursday also showed Dutch Prime Minister Mark Rutte won a closely contested election, granting pro-European parties a sweeping victory in a core euro zone country.

The euro traded up 0.1 percent at $1.2912, near a four-month high at $1.2937 seen on Wednesday. The single currency was at 100.38 against the yen, also close to its highest in over two months at 100.64 yen hit the day before.

U.S. crude inched up 0.1 percent to $97.08 a barrel but Brent eased 0.1 percent to $115.80, after rising on Wednesday on the German court ruling and geopolitical concerns.

Spot gold steadied at $1,731.35 an ounce, after expectations for a new U.S. monetary stimulus fuelled a rally to 6-1/2 month highs of $1,746.20 on Wednesday.

Data showed in August, gold drew four-fifths of all the money that went into some 230 U.S.-regulated commodity products and funds that Lipper tracks, while a J.P. Morgan Securities report showed U.S. prime money market funds raised their holdings of euro zone bank debt last month.

(Additional reporting by Hideyuki Sano in Tokyo, Carrie Ho in Shanghai and Thuy Ong in Sydney; Editing by Michael Perry)

Source: http://news.yahoo.com/asian-shares-steady-amid-caution-fed-decision-031122844--finance.html

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