* Spreadbetters see subdued open for European shares
* Concerns about possible U.S. govt shutdown, lack of Fed clarity weigh
* Euro remains under pressure after downbeat German sentiment survey
* U.S. data supports Fed's decision to hold off on stimulus cut
* Oil edges up on hopes for thaw in U.S., Iran relations
By Lisa Twaronite
TOKYO, Sept 25 Asian shares turned in a lacklustre performance and the dollar treaded water against a basket of currencies on Wednesday, as concerns about a possible U.S. government shutdown and uncertainty about the Federal Reserve's policy outlook made investors hesitant to push out of recent ranges.
This subdued trading pattern was also seen likely in Europe, where financial spreadbetters predicted Britain's FTSE 100 to open flat to 8 points lower, Germany's DAX to open flat to 2 points lower, and France's CAC 40 to fall 2 to 3 points.
Tea Party-backed U.S. senators are threatening to stall a bill to fund the U.S. government.
Fears are growing in Washington that political dysfunction might lead to a default next month if lawmakers don't authorize more borrowing.
"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 the U.S. capital.
MSCI's broadest index of Asia-Pacific shares outside Japan slipped about 0.2 percent, while Japan's Nikkei stock average skidded 0.8 percent.
The dollar gave up early slight gains against its Japanese rival, edging down 0.1 percent to buy 98.61 yen. But it rose fractionally against a basket of six currencies to 80.569 , as sagging shares sapped investors' tolerance for risk.
The euro was flat on the day, changing hands at $1.3472. Support at its August high of $1.3453 held throughout the Asian session, even as the European unit was 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 to a 17-month high, but still fell short of the consensus forecast. The 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.
U.S. DATA VALIDATES FED'S DECISION TO STAND PAT
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, matching a 4-1/2 year low hit in the previous session.
On the commodities front, steady buying from top consumer China pushed copper futures up 0.4 percent to $7,176.50, putting them 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.
"There are some hopes there might be a gradual forging of relationship between the west and Iran, though it's still very early days," said Ric Spooner, chief market analyst at CMC Markets in Sydney.
Front-month Brent crude for November delivery rose about 0.6 percent to $109.27, while November U.S. crude added 0.5 percent to $103.68 a barrel.