extended gains on Tuesday, pulled higher by financials and a rebound in oil
prices, while the Australian dollar
hit a two-week high as investors trimmed expectations for a central bank rate cut this year.
Despite the bounce in risk-sensitive assets in Asia, volumes were light with markets
hugging well-worn trading ranges. Investors are now awaiting China data due this week, including the September quarter gross domestic product on Wednesday, after last week's trade figures raised concerns about the health of the world's second-biggest economy.
MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.8 per cent, extending earlier gains. Australia's benchmark index was up 0.4 per cent while Japanese stocks edged higher on a softer yen. European shares are expected to open higher, tracking the Asian moves.
"Investors are slightly risk averse while their attention has been on the dollar-yen levels," said Kazuhiro Takahashi, an equity strategist at Daiwa Securities. "They are waiting for a turning point, and until then, they will likely stay on the sidelines.
China's B share market bounced 1.5 per cent after tumbling more than six per cent on Monday on concerns of extended yuan weakness while Hong Kong shares rose, led higher by financials and utilities.
"The Hong Kong markets
should find some support around current levels though the weak outlook from the telecom and the property sector and continued concerns of yuan weakness will prevent any sharp gains," said Alex Wong, a portfolio manager at Ample Capital, which has $100 million in assets under management.
As campaigning for the US presidential elections enters its home stretch and concerns about the Chinese economy deepen after last week's weak trade data, risk aversion is broadly on the rise - forcing investors to cut positions after a strong rally in risky assets in the third quarter of 2016.
Daily portfolio flows to emerging markets
declined sharply last week with the seven-day moving average falling to its lowest level since a surprise Chinese currency devaluation in August 2015, according to data from Institute of International
"It's been an incredibly quiet start to the week as most currencies remain rangebound but don't let this sense of calm fool you as markets
may be poised to explode," said Stephen Innes, a senior trader at FX broker OANDA, referring to a multitude of macro-economic risks on the horizon.
Adding to the headwinds for emerging markets
is the growing likelihood of a US rate increase in December which has lifted 10-year US Treasury yields by 25 basis points so far this month and boosted the dollar.
Wall Street ended down as lower oil
prices weighed on energy shares. Stock futures were flat in Asian trade.
Major currencies were confined in broad trading ranges on the back of soggy US data and the absence of fresh triggers.
"Rangebound trading continues, with the 104 level heavy for the dollar-yen," said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo. "It's just short-term guys, playing in the market."
The dollar index, which tracks the greenback against six major rivals, was flat at 97.74, after rising as high as 98.169 in the previous session, its highest level since March 10.
Still, some risk indicators in the market were flickering green such as the Australian dollar, which was up around 0.6 per cent at $0.7669. This came after comments from Reserve Bank of Australia Governor Philip Lowe, which suggested the bar for further rate cuts this year is higher than what markets
prices rose on hopes the market may not be as oversupplied as some analysts believe.
benchmark Brent crude was up 0.5 percent while U.S. West Texas Intermediate (WTI) edged 0.6 per cent higher.
Safe-haven gold was firm around the $1,250 per ounce level as growing risk aversion encouraged buyers, halting a six per cent fall over the last few weeks.