By Nichola Saminather
SINGAPORE (Reuters) - Asian stocks edged slightly higher on Monday, while the European Central Bank's apparent equanimity at the euro's nearly two-year highs left the dollar languishing.
European markets are expected to open mixed, with financial spreadbetter CMC Markets predicting Britain's FTSE 100 to open 0.1 percent lower, Germany's DAX to open little changed, and France's CAC 40 to start the day up 0.1 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan reversed earlier losses to edge up 0.2 percent.
Chinese bluechips and the Shanghai Composite were both up 0.3 percent. Hong Kong's Hang Seng added 0.5 percent.
But Japan's Nikkei dropped 0.6 percent, pressured by a stronger yen. Australian shares retreated 0.7 percent and South Korea's KOSPI edged down 0.1 percent.
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Despite a pullback in Asia-Pacific stocks, sentiment remains solid, said Jim McCafferty, head of equity research for Asia Pacific at Nomura.
"The first three weeks of July have seen continuation of strong first half performance," McCafferty said. "We are just three weeks in to the second half of the year and investors are continuing to like the Asia-Pacific story."
On Friday, global stocks ended a 10-day winning streak, taking a breather from a rally that had propelled them to a record high in the previous session. The index was flat on Monday.
Wall Street indexes ended Friday flat to about 0.15 percent lower, as disappointing earnings from General Electric and energy shares weighed.
European shares also closed lower, with Germany's DAX slumping 1.7 percent, hurt by the euro's strength.
The euro was trading 0.1 percent higher at $1.16715 on Monday, just a whisker below a nearly two-year high of $1.1684 hit earlier in the session.
ECB President Mario Draghi's comments on Thursday, which conspicuously avoided citing the euro's recent strength as a problem, emboldened traders convinced the central bank will begin tapering its bond-buying program later this year.
"There has been very little back-pedalling on the long euro storyline as dealers continue to place much emphasis on Draghi declining the opportunity to talk down the currency post-ECB minutes," Stephen Innes, head of Asia-Pacific trading at OANDA, wrote in a note.
"And factoring in the expanding U.S. political sinkhole which is weighing on broader USD sentiment, it's unlikely the market has run out of steam," he wrote, adding he expects the euro to test the August 2015 high of $1.1715 "sooner than later".
The dollar index, which tracks the greenback against a basket of trade-weighted peers, crept higher but remained subdued on Monday.
After touching 93.823, its lowest level since June 2016 early on Monday, it edged up to 93.880, marginally above Friday's close.
The dollar continued to slide against the yen, however, retreating 0.1 percent to 111.020 yen.
Markets are awaiting the Federal Reserve's meeting on Tuesday and Wednesday for an update on its plan to start normalising its balance sheet.
"All eyes will be on the Fed this week, with market participants eager to see if the Fed formally announces the start of its balance sheet normalisation plan or opts to wait until September," Michala Marcussen, global head of economics at Societe Generale, wrote in a note.
"We are in the September camp, but we acknowledge that it is a coin toss between this week's meeting and the next one."
In commodities, oil prices roes on expectations that the joint OPEC and non-OPEC ministerial meeting later in the day would address rising production from Nigeria and Libya, two OPEC members exempted from the cuts, bolstered prices.
However, gains were capped by a consultant's forecast of a rise in OPEC production for July despite the group's pledge to curb output, which led to a plunge in prices on Friday.
Global benchmark Brent crude was up 0.1 percent at $48.10 a barrel, after Friday's 2.5 percent tumble, while U.S. crude edged up slightly to $45.79, after Friday's 2.2 percent slump.
Gold shone on the dollar's weakness and a decline in risk appetite, with spot gold just slightly lower at $1,254.31 an ounce, retaining most of Friday's 0.8 percent jump, and slightly below a one-month high hit earlier.
(Reporting by Nichola Saminather; Editing by Lisa Twaronite and Shri Navaratnam)