Asian shares slip, dollar steady as Fed policy shift looms

Easing tension in Syria continues to underpin investors' risk tolerance

Asian shares slipped slightly and the dollar treaded water on Tuesday, as global markets braced for the outcome of the US Federal Reserve's two-day policy meeting at which it is widely expected to begin withdrawing stimulus.

Despite a lacklustre August jobs report, the US central bank is expected to begin scaling back its quantitative easing scheme by reducing its monthly asset purchases by about $10 billion from the current $85 billion.

"If the Fed fails to deliver, it will reinforce the criticism about the Fed's communication effectiveness," strategists at Brown Brothers Harriman said in a note to clients.

"Yet if the Fed tapers and demonstrates that its communication has indeed been effective as the majority of market participants correctly anticipated the tapering, it risks repeating its previous mistakes when it ended previous QE operations prematurely," they said.

MSCI's broadest index of Asia-Pacific shares outside Japan fell about 0.1%, with Japan's Nikkei stock average up 0.2% after Japanese markets were closed on Monday for a public holiday.

Japanese shares caught up to news that former US Treasury Secretary Lawrence Summers unexpectedly withdrew from consideration for the US central bank's top job on Monday. Summers was seen as more prone to wind down stimulus than the new front-runner, Fed Vice Chairwoman Janet Yellen.

The US dollar index slipped slightly to 81.277, after falling to a low of 80.968 on Monday, its lowest level since August 21, following the Summers news.

The dollar was up about 0.1% against its Japanese counterpart at 99.14 yen, while the euro was nearly flat from US levels at $1.3334, after it hit a more than two-week high of $1.3385 in the previous session.

The Australian dollar was down from a three-month high of $0.9387 touched on Monday, slipping slightly on the day to $0.9311 ahead of the release of the Reserve Bank of Australia's minutes of its September3 policy meeting. The central bank kept the cash rate unchanged at 2.5%.

Easing tension in Syria continued to underpin investors' risk tolerance, after Russia and the United States reached a deal on Saturday to remove Syrian President Bashar al Assad's chemical arsenal and possibly avert US military action against him.

UN chemical investigators on Monday confirmed the use of sarin nerve agent in an August 21 poison gas attack outside the Syrian capital.

On the commodities front, three-month copper on the London Metal Exchange fell 0.2% to $7,072.25 a tonne. It dropped to a five-week low of $7,024 a tonne on Friday, as investor appetite for risk improved on expectations of a diplomatic solution to the Syria crisis and the dollar fell.

Gold was down slightly at $1,313.01 an ounce.

Brent crude for delivery in November fell by 0.5% to $109.53 a barrel, moving further away from the six-month high of $117.34 a barrel reached in late August on worries about a possible US military strike against Syria.