By Lisa Twaronite
TOKYO (Reuters) - Asian shares withered on Tuesday and the yen firmed against the backdrop of rising tensions on the Korean Peninsula, and as investors awaited fresh signals about the U.S. monetary policy outlook.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.3 percent, following tech-focused losses on Wall Street.
Federal Reserve Chair Janet Yellen is scheduled to speak later on Tuesday (1645 GMT) on "Prospects for Growth: Reassessing the Fundamentals".
Investors will be parsing her words for clues on whether the U.S. central bank will stick to its plan to raise interest rates in December.
"If the U.S. is going to increase its policy rate as soon as December, that is going to support the dollar, but the situation is complicated by the North Korean tensions," said Harumi Taguchi, principal economist at IHS Markit in Tokyo.
"Even if Yellen says something positive for the markets, it might just be offset by the geopolitical risks," she said.
North Korea's foreign minister said on Monday that a weekend tweet by President Donald Trump counted as a declaration of war on North Korea and that Pyongyang reserved the right to take countermeasures, including shooting down U.S. bombers even if they are not in its air space.
North Korea has been moving airplanes and boosting defences on its east coast after the United States dispatched B-1B bombers to the Korean peninsula over the weekend, South Korea's Yonhap News Agency reported on Tuesday, citing the country's spy agency.
Australian shares were down 0.1 percent, while South Korean shares slid 0.3 percent.
Japan's Nikkei stock index sagged 0.4 percent, pressured by a stronger yen.
"In addition to North Korea, the stronger yen is affecting shares today, and there's also Apple's poor performance, after the report that it told suppliers to reduce parts shipments," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
Apple Inc shed 0.9 percent on Monday after it was reported the company had told suppliers to scale back shipments of parts for its upcoming iPhone X.
The dollar dropped 0.2 percent against the yen to 111.51, well shy of last week's two-month high of 112.725.
The yen tends to benefit during times of risk aversion due to Japan's net creditor status and the expectation that Japanese investors would repatriate assets when facing a crisis.
The euro edged up after tumbling on Monday following a severely diminished election victory for German Chancellor Angela Merkel that was accompanied by a surge in support for the far right. Support for Merkel's conservatives unexpectedly slumped to its lowest since 1949 and the Social Democrats, partners in the outgoing coalition, said they would go into opposition.
The single currency was 0.1 percent higher at $1.1861, while the dollar index, which tracks the greenback against a basket of six major rivals, was down 0.1 percent at 92.551.
On Monday, New York Fed President William Dudley said the U.S. central bank is on track to gradually raise rates given factors depressing inflation are "fading" and the U.S. economy's fundamentals are sound.
But Chicago Fed President Charles Evans said the Fed should wait until there are clear signs of faster wage and price growth before hiking rates again.
Crude oil prices extended gains after soaring more than 3 percent on Monday, as major producers said the global market was on its way to rebalancing while Turkey threatened to cut oil flows from Iraq's Kurdistan region to its ports.
U.S. crude added 0.2 percent to $52.34 a barrel, after touching its highest levels since April. Brent crude rose 0.7 percent to $59.45, after scaling its highest peak since July, 2015.
Gold edged slightly lower but remained close to levels touched in the previous session when the heightened Korean tensions helped push it up more than 1 percent. Spot gold eased a few ticks to $1,309.96 per ounce.
(Reporting by Lisa Twaronite; Editing by Eric Meijer and Kim Coghill)
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
