TOKYO Asian shares got off to a weak start on Thursday after a lackluster performance on Wall Street overnight and ahead of Chinese inflation data, while the dollar stood tall against a basket of currencies.
All eyes will now be on Friday's nonfarm payroll report, which will further indicate how the U.S. economy is faring - and therefore how fast the Federal Reserve will scale back stimulus.
Economists polled by Reuters have forecast 196,000 jobs were added to the U.S. economy in December.
The greenback gained overnight after payrolls processor ADP said U.S. private employers added a bigger-than-expected 238,000 jobs in December, the strongest increase in 13 months, but showed muted reaction to minutes of Federal Reserve's December meeting.
The December 17-18 meeting minutes showed Fed policymakers were keen to steer a delicate path and to make it clear that future decisions were not set in stone, as they began reducing its monthly bond purchases to $75 billion from $85 billion this month.
"While the committee was clearly attentive to the impact of taper on financial conditions, there was also concern expressed about compressed risk premiums if quantitative easing were to continue for too long," analysts at BNP Paribas wrote in a note.
"Our economists think the FOMC is on track to continue tapering in measured steps on course for ending asset purchases by the end of this year," they said. "Against this backdrop, we remain constructive on the USD."
The Fed's massive stimulus has been a major driver for risk assets over the past few years.
According to CME FedWatch, short-term U.S. interest rates futures implied traders now assign a 60 percent probability for the first Fed rate hike as early as April 2015.
The dollar was a tad softer at 104.82 yen, having gained 0.3 percent to 104.87 in the previous session.
Against the euro, it was steady at $1.3575, having risen as high as $1.3554 on Wednesday.
The greenback .DXY hit a seven-week high against a basket of major currencies.
Ahead of China's inflation data, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slipped 0.2 percent after snapping a five-day losing streak on Wednesday.
Despite the yen weakness, stock index futures pointed to a softer open for the Nikkei benchmark .N225 on Thursday. The index rebounded 1.9 percent in the previous session after losing nearly 3 percent in the first two trading days of 2014.
The other major event on Thursday was the European Central Bank policy meeting. Analysts doubt it will do more than flag its readiness to act when needed, despite another surprising fall in euro zone inflation.
Among commodities, gold was little changed at $1,225.60 per ounce, taking a pause after losing two-day in a row and touching a one-week low on Wednesday.
U.S. crude futures added 0.2 percent to $92.56 a barrel after tumbling 1.2 percent to a five-week low overnight after data showed a large build in stockpiles at the U.S. benchmark delivery point.
(Editing by Eric Meijer)