By Lisa Twaronite
TOKYO (Reuters) - Asian shares inched tentatively higher on Tuesday as the focus turned to an imminent policy decision from the Bank of Japan, while the dollar rebounded after investors locked in some gains on its recent rally.
MSCI's broadest index of Asia-Pacific shares outside Japan was up about 0.1 percent, wobbling between positive and negative territory after a choppy, losing session on Wall Street overnight.
Japan's Nikkei stock average drifted down about 0.1 percent in early afternoon trading, as investors awaited the outcome of the Bank of Japan's policy meeting.
The BOJ is widely expected to maintain its massive monetary stimulus programme and offer a bleaker view on factory output, after signs Japan's economy was hit harder than expected by a national sales tax increase in April.
Tokyo stocks got some help after Bank of Japan Governor Haruhiko Kuroda told a parliament committee meeting in the morning that a weak yen, as a whole, has a positive effect on Japan's economy if the currency's move reflects economic and market fundamentals.
"There were concerns about a negative impact of the weak yen on the economy as well, so his comment was assuring," said Nobuhiko Kuramochi, a strategist at Mizuho Securities.
The dollar added about 0.3 percent to 109.11 yen, pulling well away from an overnight low of 108.65 and moving back toward its six-year peak of 110.09 yen marked last week.
The euro fell 0.3 percent on the day to $1.2641, heading back in the direction of a more than two-year low of $1.2501 set on Friday, after the U.S. non-farm payrolls report fuelled speculation that the Federal Reserve will hike interest rates by mid-2015.
Currency investors had a muted reaction to Monday's disappointing report on German industrial orders, which fell 5.7 percent in August to mark their biggest monthly drop since 2009. The data pressured euro zone bond yields and sent 10-year Bund yields close to record lows.
The dollar index, which tracks the greenback against six major currencies, edged up 0.1 percent to 85.987 after marking its biggest one-day fall since July 2013 on Monday. The index rose to a four-year high of 86.746 on Friday, and logged a record 12 straight weeks of gains in which it rose about 7.7 percent.
The Reserve Bank of Australia held its cash rate steady at 2.5 percent at its regular policy review on Tuesday, and said that its currency remains high by historical standards.
The Australian dollar erased earlier gains and slipped about 0.3 percent to $0.8738, moving back towards Friday's low of $0.8642 which was its weakest level since July 2010.
The dollar's overnight weakness helped bolster recently slumping crude prices. Brent edged down about 0.2 percent on the day to $92.62 a barrel.
Gold eased about 0.2 percent to $1,204.84 an ounce. In a volatile session on Monday, it marked its biggest one-day gain in two months, after first bumping to a 15-month low.
(Additional reporting by Ayai Tomisawa in Tokyo; Editing by Eric Meijer & Shri Navaratnam)
