Dollar steady before Fed, China stocks up on growth pledge

By Dominic Lau

TOKYO (Reuters) - Chinese shares gained after Beijing pledged to keep economic growth stable in the second half of the year, while the dollar held onto slight gains as market momentum stalled ahead of the outcome of the U.S. Federal Reserve policy meeting on Wednesday.

The dollar was steady against a basket of major currencies after a 0.2 percent rise on Tuesday. The dollar index is down 1.6 percent in July and set to post a second straight monthly loss for the first time since the turn of the year.

The dollar index hit a five-week trough earlier this week as investors bet the Fed would reassure markets that interest rates would remain low for a long time even if it started scaling back stimulus this year.

The Fed will release its post-meeting statement at 1800 GMT, but there will be no news conference by Chairman Ben Bernanke.

"Traders globally seem to be in a wait-and-see mode before the outcome of the Fed's meeting on the timing of quantitative easing tapering," said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management in Tokyo.

The Fed is expected to link the start of any tapering to data signals, and markets have two major reports this week.

U.S. second quarter GDP data on Wednesday is expected to show growth slowed to an annualised pace of 1.0 percent in the second quarter from 1.8 percent in the first, while payrolls data on Friday is forecast to show a fall in the jobless rate.

The European Central Bank and the Bank of England meet on Thursday, and are set to hold policy steady.

The yen was at 98.050 yen to the dollar, little changed on the day, while the euro was steady at $1.32630 after hitting a six-week high of $1.33025 on Tuesday.

CHINESE SHARES UP

China's CSI300 <.CSI300> index rose 0.9 percent after authorities pledged to keep growth stable in the second half of 2012 while pressing ahead with reforms and restructuring. [ID:nL4N0G02BP] The index is still down 12.5 percent this year.

"The statement made by the Politburo is quite favourable for the property sector," said Cao Xuefeng, a Chengdu-based head of research at Huaxi Securities.

Asian shares as measured by the MSCI Asia-Pacific ex-Japan index dipped 0.1 percent. The index is up 2.5 percent so far this month, on track to end a two-month losing run, though it is still down 4.9 percent so far this year.

Japan's Nikkei share average <.N225> dropped 0.8 percent in light trading, giving up some of the previous session's 1.5 percent gain. Still, the benchmark is up 32 percent in 2013.

Of the 54 Nikkei companies that have reported quarterly earnings so far, two-thirds either beat or met market expectations, according to Thomson Reuters StarMine, versus 54 percent in the previous quarter.

But in a sign that companies are curbing production due to slowing growth in exports, Japanese manufacturing activity in July grew at the slowest pace in four months.

HIGHER COMMODITIES

In commodity markets, copper prices climbed 0.9 percent to near $6,800 a tonne, rebounding from near three-week lows after dropping 2.1 percent on Tuesday on concerns about demand in top consumer China.

A Reuters poll found Chinese manufacturing activity may have contracted in July for the first time in 10 months, signalling a protracted slowdown in the world's second-largest economy. The PMI will be released on Thursday.

Gold gained 0.4 percent. It is up 8.1 percent so far this month, on track to snap a three-month losing run and mark its biggest monthly rise since January 2012, but it is down 20 percent since the beginning of the 2013.

Brent crude prices was steady at just below $107 a barrel, stabilising after a 0.6 percent decline on Tuesday.

(Additional reporting by Ian Chua in SYDNEY, Tomo Uetake in TOKYO and Clement Tan in HONG KONG; Editing by John Mair)