By Shinichi Saoshiro
TOKYO (Reuters) - Asian shares slipped on Tuesday as a U.S. holiday robbed markets of momentum, while the euro hit a fresh one-year low on uncertainty over the European Central Bank's policy decision later this week.
MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.4 percent after managing to carve out gains on the previous day.
A U.S. labor market holiday on Monday kept investors subdued in Asia. The mood was also tempered by the persistent geopolitical concerns and weak manufacturing sureys in Asia and Europe showing pockets of weakness in the global economy.
Tokyo's Nikkei <.N225> bucked the trend and rose 1.2 percent, with a planned cabinet reshuffle by Prime Minister Shinzo Abe helping fuel reform hopes.
In currencies, the dollar, boosted by the flagging euro and gains in Tokyo shares that dented the appeal of the safe-haven yen, rose to a seven-month high of 104.76 yen .
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"The dollar's gains are driven by actual flows, such as options-related buying. The market is also keeping an eye on the rise in equities," said Shinichiro Kadota, chief Japan FX strategist at Barclays Bank in Tokyo.
Immediate focus was on the ISM's report on U.S. manufacturing due later in the day, which might point to the U.S. phasing out quantitative easing just as the ECB contemplates its adoption.
The euro slipped to a fresh one-year low of $1.3117 .
The common currency was expected to remain under pressure ahead of Thursday's European Central Bank policy meeting.
While many market participants do not expect the ECB to take major easing steps this week, a few are seen braced for new policy measures. Further central bank easing is considered a matter of when and not if in the face of risks to euro zone growth posed by the Ukraine conflict and stubbornly low inflation.
"This week may start to mark the biggest shift in global monetary policy since 'Abenomics' went into full steam on the appointment of Haruhiko Kuroda to head up the BOJ," equity strategists at Jefferies wrote in a note to clients.
The decline in European headline inflation rates, collapse in German bund yields and the call by the president of the ECB for 'growth friendly' fiscal policy suggests that Europe is finally moving towards quantitative easing, they said.
The currency markets will also be keeping an eye on the Reserve Bank of Australia's policy review due later in the session, although little Australian dollar reaction is expected since the chance of a rate change is just about zero. [AUD/]
In commodities, palladium hovered near a 13-1/2 year high of $910 an ounce hit overnight on fears that possible Western sanctions against Russia over the Ukraine crisis could hit supply from the world's top producer of the metal, while gold nudged higher. [GOL/]
Spot palladium last traded at $905.25 an ounce. Russia accounted for more than 40 percent of global palladium supply last year.
(Editing by Eric Meijer & Shri Navaratnam)