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Asian shares wavered in recent ranges and the dollar held not far above its recent lows on Tuesday, as investors awaited the outcome of the US Federal Reserve's policy meeting this week, at which it is widely expected to stay the course on stimulus.
Australian shares shed about 0.3% after surging 1% on Monday to a new five-year high, while MSCI's broadest index of Asia-Pacific shares outside Japan was weaving in an out of positive territory.
Japan's Nikkei stock average gave up about 0.1% but was off session lows, bolstered by data showing consumer spending in Japan jumped in September as shoppers frontloaded purchases before a sales tax increase next year.
"The market will remain relatively quiet as confirmation of market fundamentals is a priority for investors as of now," said Lee Seung-joon, an analyst at Hi Investment & Securities in Seoul, where shares edged up after erasing early losses.
Economists and market participants see no change in the Fed's $85 billion monthly asset purchase programme at the two-day meeting ending on Wednesday. Most predict the central bank to delay any stimulus tapering to at least March next year.
Monday's US economic data offered nothing to alter this view. US manufacturing output barely rose in September and contracts to buy previously-owned homes fell the most in nearly 3-1/2 years, showing economic activity was on a weak footing even before a 16-day partial shutdown of the US federal government that is expected to weigh on fourth quarter growth.
"We expect little change in the Fed's statement at the October FOMC meeting," strategists at Barclays wrote in a client note.
"The soft industrial production report, plus the larger-than-expected decline in pending home sales, is unlikely to give comfort to FOMC policymakers who await stronger economic data before initiating tapering," they said.
US S&P E-mini futures were down slightly, after the S&P 500 Index closed at a record high in New York on Monday.
The dollar index, which tracks the greenback against a basket of six major currencies, added about 0.2% at 79.346, holding above a nine-month low of 78.998 hit on Friday.
The dollar shed about 0.1% against its Japanese counterpart to 97.60 yen, but managed to stay above a more than two-week low of 96.92 yen hit on Friday, according to Reuters data.
The Bank of Japan also meets this week, and is expected to maintain its monetary policy on Thursday as it aims for its target of 2% inflation in two years.
The International Monetary Fund's top official for Asia said on Tuesday that an increase in Japanese foreign direct investment and bank lending to Asia has helped counteract capital outflows triggered by expectations that the Fed will soon taper its asset-buying programme.
The euro was nearly flat at $1.3781, not far from Friday's high of $1.3832, its highest level since November 2011.
The Australian dollar dipped more than a third of a US cent to a session low of $0.9512 after Australian central bank governor Glenn Stevens said it was likely the Aussie would fall materially in the future, given the country's declining terms of trade. That shift that would be welcomed to trade-exposed sectors of the domestic economy.
The Aussie last stood at $0.9532, well off a five-month high of $0.9758 set last Wednesday.
In commodities trading, spot gold was slightly lower at $1,351.56 an ounce after rising to a five-week high of $1,356.50 on Monday.
Copper fell about 0.5% to $7,154.75 in the wake of the downbeat US economic data.
US crude futures edged down about 0.2% towards $98 a barrel but held within sight of a one-week high as a sharp drop in Libyan oil exports rekindled worries over supply. Brent crude slipped 0.5% after surging $2.68 in the previous session.
Libya's crude oil exports have dropped to less than 10% of capacity as protests have halted operations at western ports and fields.
