By Lisa Twaronite
TOKYO (Reuters) - Asian shares slipped and the dollar held steady against a basket of currencies in Asian trade on Wednesday, as concerns about a possible U.S. government shutdown and uncertainty about the Federal Reserve's policy outlook left investors hesitant to take aggressive positions.
Tea Party-backed U.S. senators are threatening to stall a bill to fund the U.S. Government.
"It's negative to investor sentiment as a whole," said Hikaru Sato, senior technical analyst at Daiwa Securities in Tokyo, referring to the political wrangling in Washington.
MSCI's broadest index of Asia-Pacific shares outside Japan slipped about 0.2 percent, while Japan's Nikkei stock average was down 0.4 percent.
The dollar gave up early slight gains against its Japanese rival, buying 98.65 yen. But it rose fractionally against a basket of six currencies to 80.611, as sagging shares sapped investors' tolerance for risk.
The euro was down about 0.1 percent at $1.3465, with support cited at its August high of $1.3453, pressured by a disappointing German survey overnight.
The September Ifo survey of German business sentiment, released on Tuesday, showed a slight improvement from the previous month and touched a 17-month high, but still fell short of the consensus forecast.
The downbeat survey came a day after European Central Bank President Mario Draghi said the bank was prepared to do more to support the region's nascent recovery.
"It seems like an improvement in the euro zone economic data has stalled. In addition, now that Germany's election is over, the market could dust off the issues that had fallen out of focus, such as further aid to Greece," said Masafumi Yamamoto, forex strategist at Praevidentia Strategy.
On Wall Street on Tuesday, U.S. stocks mostly ended lower, extending their slide to a fourth session. The Dow Jones industrial average slipped 0.42 percent, the Standard & Poor's 500 Index 0.25 percent, and the Nasdaq Composite Index managed a modest gain of 0.08 percent.
New York Fed President William Dudley, in an interview on CNBC on Tuesday, defended the central bank's surprise decision last week to refrain from tapering its stimulus because the U.S. economy was weaker than the Fed thought in June. Dudley, a known dove, said he "wouldn't rule out" a stimulus reduction later this year.
U.S. economic data on Tuesday was mixed and lent credence to the Fed's decision to hold policy steady. U.S. home prices gained in July, but consumer confidence slipped in September, underscoring the possibility that higher interest rates and a sluggish economy could impede housing market recovery.
Asian shares had rallied after the Fed's decision, and some fear the scale of the reaction portends trouble for some Asian emerging markets when the U.S. central bank eventually does cut back on its asset purchases.
Some emerging market currencies remained under pressure. The Indonesian rupiah fell 1 percent on Wednesday, close to a 4-1/2 year low, due to increasing dollar demand from domestic companies for month-end payments, traders said.
On the commodities front, copper futures edged up 0.1 percent to $7,155.25, on track to snap a three-session losing streak fuelled by supply concerns and uncertainty about the Fed's policy outlook.
Gold rose 0.1 percent to $1,324.30 an ounce, extending some of Tuesday's gains which had followed three sessions of losses.
Oil prices firmed against a backdrop of hopeful signals that longstanding tensions in the Middle East could be easing. U.S. President Barack Obama on Tuesday cautiously embraced overtures from Iran's new president as the basis for a possible nuclear deal, but a failed effort to arrange a simple handshake between the two leaders underscored entrenched distrust that will be hard to overcome.
Front-month Brent crude for November delivery rose about 0.1 percent to $108.75, while November U.S. crude also added 0.1 percent to $103.25 a barrel.
(Additional reporting by Ayai Tomisawa and Hideyuki Sano in Tokyo; Editing by Eric Meijer)
