By Nigel Stephenson
LONDON (Reuters) - European shares fell and the dollar held steady before a Federal Reserve meeting that was expected to lay the groundwork for the first increase in U.S. interest rates in nearly a decade.
The Fed is widely expected to remove the word "patient" from its statement on the timing of its first hike since 2006, possibly paving the way for policy tightening as early as June.
Nervousness before the decision, due at 1800 GMT, weighed on stock markets. Wall Street was expected to open lower, according to index futures.
The pan-European FTSEurofirst 300 stocks index reversed early gains and was last down 0.1 percent at 1,583 points as shares in car makers and Greek banks fell.
"Equity markets are overbought and some uncertainty is a perfect excuse to take some profits," Gerhard Schwarz, head of equity strategy at Baader Bank in Munich, said.
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Earlier, shares rose across Asia. Tokyo's Nikkei index rose 0.6 percent to a 15-year high on expectations of economic recovery and higher shareholder returns.
Chinese stocks rose for a sixth session in anticipation of fresh government stimulus. The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 2.4 percent. China's average new home prices fell at their fastest pace on record last month, data showed on Wednesday.
MSCI's main index of Asia-Pacific shares outside Japan was last up 0.4 percent.
The dollar, which has risen more than 20 percent against major currencies over the past year in anticipation of higher U.S. rates, held steady. The Fed announcement will be followed by a news conference with Chair Janet Yellen.
BUND AUCTION
While the trajectory of U.S. rates is clear, some analysts say recent weak economic data may delay any move beyond June.
"Our base case is that they will remove patience. If we get that and a measured message on the dollar's impact on inflation then, given the slight retracement we have seen in the first half of this week, I think the dollar will do well," said Michael Sneyd, a currency strategist with BNP Paribas in London.
Against a basket of its peers, the U.S. currency was up less than 0.1 percent.
U.S. Treasury yields edged down. Ten-year yields were last at 2.03 percent, compared with 2.06 percent in New York on Tuesday.
The euro, which fell to a 12-year low last week as the European Central Bank began a 1 trillion-euro bond-buying programme designed to boost growth and inflation, was up 0.2 percent at $1.0618. The dollar fell 0.2 percent to 121.12 yen.
However, sterling fell to a five-year low against the dollar after weaker-than-expected UK wage data and cautious minutes from the Bank of England prompted investors to push back expectations of when interest rates would rise.
Markets were also watching for finance minister George Osborne's last national budget before parliamentary elections on May 7. Sterling was last down 0.6 percent at $1.4657.
German government bond yields fell after an auction of 10-year debt met strong demand amid concern the ECB's bond-buying will lead to a scarcity of top-rated debt. Ten-year yields fell 5.4 basis points to 0.229 percent.
Brent crude oil edged down towards $53 a barrel after a forecast that U.S. crude stockpiles would reach record highs, maintaining a global supply glut. Brent last traded at $53.37.
Gold lifted off four-month lows, with market participants cautious before the Fed announcement. Spot gold last traded at $1,149.40 an ounce.
(Additional reporting by Blaise Robinson in Paris and Patrick Graham in London; Editing by Alison Williams)