TOKYO Dec 18 Asian shares were tentative on
Wednesday as investors waited with bated breath to hear when the
U.S. Federal Reserve will begin unwinding its massive stimulus,
a major driver for global risk assets in recent years.
On Tuesday, a better-than-expected report on U.S. house
builder confidence and inflation data suggesting low but stable
price growth supported the view that economic conditions are
adequate for the U.S. central bank to start scaling back its $85
A majority of economists polled by Reuters expect the taper
to happen in March, but a recent run of upbeat economic data has
steadily shortened the odds on an announcement at the end of a
two-day meeting later in the day -- or in January.
"The market neutral decision is a January taper," Citigroup
said in a note. "A nominal taper (on Wednesday) would catch 60
percent of the market by surprise - and FX positioning remains
overweight emerging market FX."
"For traders, this is still USD positive, but the
sustainability of USD strength depends on any language changes
we expect to accompany it."
The Federal Open Market Committee will release a policy
statement at 1900 GMT, followed by Fed Chairman Ben Bernanke
hosting a keenly-awaited news conference a half hour later.
MSCI's broadest index of Asia-Pacific shares outside Japan
inched up 0.1 percent. On Tuesday, it trimmed
early gains to end flat.
Japan's Nikkei futures dipped 0.2 percent, signalling a
modest drop after rebounding on Tuesday from a sharp loss on the
first day of the week.
Still, the benchmark has risen 47 percent this year, on
track to its best yearly rise since 1972, powered by Tokyo's
aggressive fiscal and monetary stimulus to revive the world's
Overnight, U.S. stocks closed slightly lower, with the
Standard & Poor's 500 down 0.3 percent, as investors were
reluctant to make big bets before the Fed decision.
Investors also cut back some of their long dollar positions
against the euro and the yen. The greenback was down 0.1 percent
at 102.58 yen, adding to a 0.3 percent decline overnight
and pulling further away from a five-year high of 103.925 yen
set on Friday.
"We may see nothing at all from the Fed, although they would
give a strong indication a taper is on the cards. This is a
strong possibility as well, which could be USD negative," Chris
Weston at financial spreadbetter IG wrote in a note.
"I would use this as a buying opportunity though, especially
against the JPY, given the market will start to expect this
action in January."
The euro was steady at $1.37705, having risen 0.2
percent in the previous two sessions. The common currency
touched a six-week high of $1.3811 on Dec. 11.
Among commodities, U.S. crude prices added 0.1
percent to about $97.3 a barrel, recovering some of the previous
session's 0.3 percent decline.
Gold stabilised at around $1,229.6 an ounce, having
fallen 0.8 percent overnight. The precious metal has fallen more
than 26 percent this year, heading for its worst year
performance since 1981.