Asian shares drift lower as caution prevails

Nikkei falls 0.8%, MSCI index of Asia-Pacific shares outside Japan down 0.1%

An index of Asian shares and the dollar both edged down on Wednesday, as investors grew cautious ahead of central bank meetings and US data later in the week.

MSCI's broadest index of Asia-Pacific shares outside Japan was down about 0.1% in early trade, while Japan's Nikkei stock average fell 0.8%.

On Wall Street overnight, US stock indexes retreated from record highs hit earlier in the week.

The euro inched up against the dollar to $1.1180 , a day ahead of a European Central Bank meeting, at which policymakers are expected to announce additional details about the bank's 1.1 trillion euro ($1.23 trillion) bond-buying quantitative easing programme. Some believe the forex impact is likely to be limited.

"We don't see a large chance of a negative EUR move as the total amount of QE is already known, and unlikely to be altered. A positive EUR impact is also unlikely to be sustained," Richard Cochinos, a strategist at CitiFX, wrote in a note to clients.

The ECB will also release new economic forecasts. Chief Economist Peter Praet said last week that it was likely to revise upward its expectations for growth in the euro zone, against a backdrop of low oil prices and a weak euro.

Some investors were reluctant to make big bets before Friday's US nonfarm payrolls report for February, which could indicates the strength of labour conditions and could add to speculation about the timing of the US Federal Reserve's interest rate hike.

Economists polled by Reuters expect an increase of 240,000 new jobs in February, falling short of the 257,000 seen in January. Ahead of the jobs data, investors will focus on US ISM services report to be released later on Wednesday.

The dollar fell about 0.1% against the yen on the day to 119.64 , moving away from a three-week high of 120.27 yen touched in the previous session.

The dollar index edged down slightly from Tuesday's high of 95.570, which was its strongest level since September 2003.

Later on Wednesday the Bank of Canada will announce its latest policy decision. It surprised markets by cutting interest rates by 25 basis points to 0.75% at its last meeting in January, but is expected to hold steady this time, with another cut seen more likely in the second quarter. 

The greenback slipped about 0.1% on the day against the Canadian dollar to C$1.2488, after falling as low as C$1.2435 on Tuesday after data showed that the Canadian economy grew by a faster-than-expected annualised rate of 2.4% in the fourth quarter.

US crude slipped about 0.2% on the day to $50.43, giving up some of the gains made overnight as fighting in Libya and signs of stronger global demand outweighed oversupply concerns.

($1 = 0.8947 euros)