Asian shares edge higher, euro gains ground ahead of Fed

Rising US manufacturing output, jump in eurozone business activity helps

Asian shares got off to a promising start on Tuesday on the back of rising US manufacturing output and a jump in euro zone business activity, ahead of a key US Federal Reserve policy decision later this week

Investors are on tenterhooks over when the Fed will start to reduce its $85 billion-a-month bond-buying programme, a major driver of global risk assets in recent years.

A majority of economists expect the taper to happen in March, but a recent run of upbeat economic data has steadily raised the odds for an announcement at this week's two-day meeting concluding on Wednesday, or in January.

"Although we have heavier odds pinned on the tapering being announced in January, we think the economic case has already been made for pulling the trigger," analysts at Societe Generale wrote in a note.

"The only reason to delay would be to give the FOMC the opportunity to strongly signal its intent to taper in January. In either case -- actual taper or signal of impending taper -- we expect the 10-year US Treasury yield to test 2.9% and the curve to bear steepen."

MSCI's broadest index of Asia-Pacific shares outside Japan added 0.1% after hitting a three-month intraday low in the previous session.

In Tokyo, Nikkei futures advanced 0.8%, indicating a firmer open after shedding 1.6% to a 3-1/2 week closing low on Monday.

Overnight, US stocks rose, having posted their worst week since August on Friday, after manufacturing output increased for a fourth straight month in November, suggesting the economy is gaining momentum. US S&P E-mini futures dipped 0.1% in early Asian trade on Tuesday.

Yields on benchmark 10-year US Treasuries ended 11 basis points higher at 2.8793% on Monday, not far from a three-month high of 2.932% set on December 6.

The pick-up in euro zone business activity boosted the common currency. It stood at $1.3761, having risen to as high as $1.3800 in the previous session, within sight of a seven-week high of $1.3811 reached last week.

The dollar pulled back further against the yen from a five-year high set on Friday. The greenback was at 103.08 yen after easing 0.3% on Monday.

Ahead of the Reserve Bank of Australia policy meeting minutes, the Australian dollar was down a tad at$0.8944, near a 3-1/2 month low of $0.8909 set on Friday.

Among commodities, US crude prices eased 0.2% to about $97.25 a barrel, giving up some of the previous session's 0.7% rise.

Gold took a pause after rising for two straight days. It stood at around $1,240 an ounce on Tuesday morning.