(Corrects gold milestone to low instead of high in 13th paragraph)
By Hideyuki Sano
TOKYO (Reuters) - Asian shares dragged their feet on Tuesday after a healthcare mega-merger failed to impress investors while the dollar held firm near an eight-month high as investors grew more convinced of a U.S. rate hike next month.
MSCI's broadest index of Asia-Pacific shares outside Japan was almost flat while Japan's Nikkei dipped 0.1 percent after a long weekend.
Wall Street shares edged down on Monday with Pfizer's plan to buy Allergan plc in a $160 billion deal quickly drawing criticism from politicians as a tax dodge.
"Investors may feel that even if this deal comes through, this will become the last of this sort," said Yoshinori Shigemi, global market strategist at JPMorgan Asset.
For now, markets have shown no immediate reaction to worldwide travel alert issued by the U.S. State Department, warning U.S. citizens of the risks of travelling because of what it described as "increased terrorist threats."
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The dollar's index against six major currencies rose to an eight-month high of 100.00, edging near its 12-year peak of 100.39 touched on March 13.
Comments from San Francisco Fed President John Williams on Saturday citing a "strong case" for raising rates cemented the attraction of the dollar.
Whether the dollar can rise above its March peak could depend on the pace of the Fed's rate hikes next year.
"In March, interest rate futures were pricing in a much faster pace of rate hikes," said JPMorgan Asset's Shigemi.
Markets are currently pricing in two more rate hikes next year after a likely December move.
Still, in contrast to the Fed, the European Central Bank is widely expected to add stimulus next week, including deepening its already negative interest rates, making banks pay, not receive, interest on deposits at the central bank.
The euro fetched $1.06365, having fallen to a seven-month low of $1.0592 in U.S. trade on Monday.
Precious metals were under pressure, with gold hovering just above last week's near six-year low of $1,065.50 per ounce, last trading at $1,069.90.
Silver hit a six-year low of $13.925 per ounce and platinum to a seven-year low of $839.50.
A strong dollar also hit base metals, which have been suffering from concerns about slowing demand from China.
Copper, which has fallen 12 percent so far this month, stood at $4,490 per tonne, near 6 1/2-year low of $4,443.50 hit on Monday.
But crude prices won a reprieve after Saudi pledged to work toward oil price stability.
U.S. crude futures firmed 0.8 percent in early Asian trade to $42.10 per barrel, compared to three-month low of $38.99 hit on Friday.
(Reporting by Hideyuki Sano; Editing by Eric Meijer)