* Fed tapering expectations keeps Asian shares subdued
* Dollar index near two-month high
* Central banks in Japan, Thailand and Canada in focus
* Higher-than-expected Australia inflation hurts local
shares, lifts Aussie
By Hideyuki Sano
TOKYO, Jan 22 Asian share markets struggled for
inspiration on Wednesday, hampered by expectations of further
reductions in the U.S. Federal Reserve's stimulus and ahead of
central bank meetings in Japan and Thailand.
The dollar remained broadly supported, trading around its
highest level since mid-November against a basket of currencies,
with many investors expecting the Fed to trim its bond buying
further next week.
"Investors started the year with an optimistic global
economic outlook. But so far, we haven't seen much in the way of
additional proofs for such optimism," said Daisuke Uno, chief
strategist at Sumitomo Mitsui Bank.
Japan's Nikkei was almost flat, while MSCI's
broadest index of Asia-Pacific shares outside Japan
was off 0.1 percent.
Australian shares fell 0.8 percent, extending losses
after an unexpectedly large spike in inflation reduced the
prospects of a rate cut, though the data also helped to lift the
Australian currency 0.6 percent to $0.8855.
In a mixed day on Wall Street the Standard & Poor's 500
Index rose 0.28 percent and the Nasdaq Composite Index
gained 0.67 percent, while the Dow Jones industrial
average fell 0.27 percent on disappointing earnings by
three of its components.
The dollar index stood at 81.072, having risen as
high as 81.388 on Tuesday.
The euro traded at $1.3566, not far from a two-month
low of $1.3508 hit on Monday while the yen stood at 104.30 yen
, not far from a five-year high of 105.42 yen hit on Jan.
The Bank of Japan is widely expected to keep its policy on
hold on Wednesday, although some investors are looking for signs
of further easing from its Governor Haruhiko Kuroda.
The Canadian dollar drooped near a four-year low ahead of a
policy announcement from the Bank of Canada later in the day,
with many traders speculating the bank could shift its policy
bias from neutral to easing.
The Canadian dollar traded at C$1.0967 per U.S. dollar
, having touched $1.1019 on Tuesday.
In contrast, investors expect the Fed to trim its monthly
bond buying by around $10 billion to $65 billion at its Jan
28-29 meeting, the last meeting under outgoing Chairman Ben
Bernanke, after it cut purchases by $10 billion in December.
Such a move could unsettle emerging markets, as foreign
investors re-route funds back towards U.S. markets on further
signs of a healthier economy.
THAI BANK MEETS
The Thai central bank also meets on Wednesday and could cut
rates to shore up a sagging economy hit by months of political
unrest, putting renewed pressures on the Thai baht.
Bangkok has declared a 60-day state of emergency, saying it
wants to prevent any escalation of more than two months of
protests aimed at forcing Prime Minister Yingluck Shinawatra
The baht stood little changed at 32.87 to the dollar,
not far from a four-year low around 33.13 hit earlier this
"Thai financial markets are relatively calm for now. But if
the political standoff drags on, then there will be delays in
infrastructure investment and larger economic implications,"
said Yukino Yamada, senior strategist at Daiwa Securities.
Turkey, another emerging economy hit by political turmoil,
saw its currency plunge to a record low on Tuesday after its
central bank shied away from hiking interest rates, bowing to
what many investors see as pressure from a government bent on
maintaining growth ahead of elections.