By Dominic Lau
TOKYO (Reuters) - The euro stabilised on Wednesday after tumbling to a three-month low against the dollar after ratings agency Standard & Poor's cut Italy's debt rating, while Asian shares edged up - helped by Wall Street's gains on optimism for U.S. company earnings.
The dollar hovered near a three-year high against a basket of major currencies, with more investors betting on further gains as the Federal Reserve prepares to scale back its $85 billion a month stimulus programme.
S&P downgraded Italy's debt rating by one notch to BBB, the second lowest of the investment grade status, and left its outlook on negative, citing concerns about prospects for the Italian economy, which is stuck in its worst recession since World War Two.
The downgrade, which moved in line with rival Moody's, came a day before Italy was due to sell 9.5 billion euros of Treasury bills and two days before a planned sale of up to 6.5 billion euros of medium- and long-term bonds.
Also weighing on the common currency was comments by European Central Bank policymaker Joerg Asmussen, who said the central bank's guidance on interest rates staying at record lows extends beyond 12 months.
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"Dollar buying will continue. With rising Treasury yields, there is no incentive to sell the dollar, particularly against the euro," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.
"However, against the yen, there is some risk ahead of Chinese data this week. Any evidence of a slowdown in China will prompt some people to buy back the yen."
The euro was steady at $1.2781 after falling to a three-month trough of $1.2755 on Tuesday.
The greenback also held steady at 101.13 yen. Against a basket of major currencies, the dollar ticked up 0.1 percent, not far from a three-year high reached on Tuesday.
The U.S. central bank releases minutes from its June policy meeting later in the day and Fed Chairman Ben Bernanke is also due to speak on Wednesday.
Sterling steadied at $1.4854 after sliding to a three-year low of $1.4814 in the previous session on weak factory output and trade data, seen as raising the risk of the Bank of England easing monetary policy in the coming months.
MSCI Asia-Pacific ex-Japan index added 0.3 but gains could be limited ahead of China's trade data. Australian shares <.AXJO> gained 0.6 percent.
Tokyo's Nikkei share average <.N225> eased 0.1 percent.
Copper prices advanced 0.5 percent to below $6,800 a tonne after shedding 1.1 percent in the previous session as the dollar gained and China inflation data reinforced concerns about slowing growth in the world's second-largest economy.
Gold dipped 0.2 percent after rising 1.1 percent on Tuesday.
Brent crude prices inched up 0.1 percent to just shy of $108 a barrel after rising 0.6 percent in the previous session on concerns that violence in Egypt could ignite conflict in the Middle East. Brent prices have rebounded 11 percent from a more than nine-month low touched on April 18.
(Additional reporting by Lisa Twaronite in Tokyo and Ian Chua in Sydney; Editing by Eric Meijer)