By Lisa Twaronite
TOKYO (Reuters) - Asian shares extended losses on Tuesday, as a sharp selloff in commodities overnight and political uncertainty in Greece made investors less willing to take risks in the final trading days of 2014.
Activity was thin ahead of the New Year holiday, with many traders having closed out positions. Japanese markets will be shut from Wednesday to Friday, reopening next Monday.
MSCI's broadest index of Asia-Pacific shares outside Japan was down about 0.6 percent on the day, and off less than 1 percent for 2014.
Japan's Nikkei stock average fell 0.8 percent on Tuesday but is up around 8 percent this year. With reflationary policies of the Bank of Japan and Prime Minister Shinzo Abe set to continue in 2015, investors maintained a bullish outlook.
"The new year will be very positive, with stocks boosted by likely additional easing by the BOJ and corporate earnings growth," predicted Takashi Hiroki, chief strategist at Monex, Inc.
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On Wall Street overnight, the Dow Jones industrial average ended slightly down, while the S&P 500 and the Nasdaq Composite managed to eke out modest gains despite the overhang of concern about Greece's political woes.
Greek Prime Minister Antonis Samaras failed to get enough support for his presidential nominee on Monday, and will call a national election for Jan. 25.
The news caused Greek shares to plunge as much as 11.3 percent before closing down 3.9 percent, and yields on 10-year Greek bonds touched their highest since September 2013.
The election could open the way for Greece's Syriza party to come to power. That party says it wants to wipe out a big part of the country's debt and cancel the terms of the bailout Athens received from the European Union and International Monetary Fund.
Developments in Greece weighed on the euro, which fell to a fresh low of $1.2130 on the EBS trading platform on Tuesday, its lowest since mid-2012. It was last down about 0.1 percent on the day at $1.2139.
"Our bearish view on EUR/USD rests on the assumption that monetary policy settings on both sides of the Atlantic are likely to diverge markedly next year," strategists at UBS wrote in a note to clients.
"That remains the case, but now we believe the return of political uncertainty to Greece could trigger an acceleration of the euro's downtrend over the next two months," UBS said.
Solid recent U.S. data has reinforced the view that the U.S. economy is improving enough for the Federal Reserve to consider ending its near-zero interest-rate policy in mid-2015. That would be in contrast to the still-sluggish economies of the euro zone and Japan, where central bankers are likely to continue monetary easing.
Against its Japanese counterpart, a perennial market favourite in times of risk aversion, the dollar slipped about 0.2 percent to 120.47 yen, but remained not far from a 7-1/2 year high of 121.84 hit earlier this month.
Despite the greenback's weakness against the yen, the dollar index, which tracks the U.S. unit against a basket of rival currencies, added about 0.1 percent to 90.252 after rising as high as 90.290, its highest level since April 2006.
The dollar's general strength continued to pressure commodities, which are priced in dollars and therefore become more expensive and less appealing to holders of weaker currencies.
Copper was flat on the day on Tuesday at $6,289.75 a tonne, after falling to its lowest level in four and a half years on concerns about a strong dollar and a slowdown in China.
But oil futures erased early gains and turned slightly lower. U.S. oil slipped to $53.59 a barrel after shedding 1.9 percent on Monday, and Brent crude LCOc1 stood at $57.83.
(Additional reporting by Thomas Wilson in Tokyo; Editing by Richard Borsuk)