Asia shares rise, dollar firm on Fed, ECB officials' comments

By Nichola Saminather

SINGAPORE (Reuters) - Asian shares rose on Tuesday and the dollar held steady as U.S. markets bounced back and the European Central Bank said it was prepared to ease monetary policy further.

MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.1 percent, with Australia up 1.1 percent and South Korea 0.1 percent. Japanese markets are shut through Wednesday.

The U.S. dollar retained most of its overnight gains in early Asian trade. It remained at 95.917 against a basket of six currencies, after earlier gaining 1 percent and at 120.50 yen after climbing 0.45 percent overnight.

The euro was little changed at $1.1190.

U.S. stocks rose overnight as St. Louis Fed President James Bullard and Atlanta Fed President Dennis Lockhart separately made the case for an increase in U.S. interest rates this year, boosting financial shares.

Investors will be looking for more clarity on the Fed's decision with a number of central bank officials, including Lockhart and Chair Janet Yellen, slated to speak this week.

In Europe, ECB Chief Economist Peter Praet reiterated the bank's readiness to modify its trillion-euro bond-buying programme should economic turbulence merit action, according to an interview in a Swiss newspaper.

Markets also took encouragement from Monday's 1.9 percent gain in Chinese stocks, Richard Grace, chief currency and rates strategist at Commonwealth Bank of Australia in Sydney, wrote in a note.

"However, it won't take much to derail some of the optimism if the September Chinese PMI due tomorrow is on the bearish side, and this may in turn take some pricing of a tightening out of the U.S. rates market," he said.

Economists polled by Reuters poll expect the flash China factory PMI to edge up to 47.5 in September from the final 47.3 in August, but that would still leave it near 6-1/2-year lows and point to a seventh straight monthly contraction in activity.

Markets are also awaiting the euro zone's flash manufacturing activity reading on Wednesday, which is expected to come in slightly stable to soft in September.

Fears of a sharper slowdown in China sparked a heavy selloff in global markets over the past month and were cited by the U.S. Federal Reserve as one of the main factors that convinced it to keep interest rates on hold last week.

Taiwan's export orders -- seen as an indicator of the strength of global demand for hi-tech products -- contracted for a fifth month in August as demand from China and key markets continued to deteriorate, data showed on Monday.

The bigger-than-expected order decline does not bode well for trade-reliant Asian economies hoping for a recovery in exports heading into the year-end shopping season and raises the chances that Taiwan's central bank will cut interest rates later this week.

Oil prices, which surged overnight on hopes that declining stockpiles and less drilling could reduce future output, gave up some of the gains in early Asian trade.

U.S. crude futures slipped 1 percent to $46.22 per barrel. Brent futures were 0.7 percent lower at $48.56.

(Reporting By Nichola Saminather; Editing by Kim Coghill)