Most Asian stock markets recouped early losses on Tuesday while the dollar was trapped in a tight range as investors waited for Federal Reserve Chairman Ben Bernanke to shed light on how soon key U.S. interest rates may start to rise.
In Europe, shares were set to edge up, with financial spreadbetters expecting Britain's FTSE 100 <.FTSE>, Germany's DAX <.GDAXI> and France's CAC <.FCHI> to open 0.2 percent higher. U.S. stock futures edged up 0.2 percent.
After the Fed's surprise increase last week in the rate it charges banks for emergency loans, markets are now focused on when the central bank will begin raising policy rates and if higher borrowing costs will weigh on a still-fragile global economic recovery.
Fed officials have been at pains in recent days to stress that the move should not be seen as a signal that a policy rate hike was forthcoming, and that a slow U.S. recovery would warrant keeping rates very low for some time. Bernanke is expected to explain the reasoning behind Thursday's move in testimony in the House and the Senate on Wednesday and Thursday.
After a soft performance on Wall Street, the MSCI index of Asian shares excluding Japan <.MIAPJ0000PUS> reversed to rise 0.6 percent, testing the 399-400 point level that has blocked it in the past week, with financials and energy stocks out in the lead.
Investors probably want to hear that the U.S. discount rate hike was not intended as tightening, and that the Fed plans to maintain its current monetary policy stance for some time, said Kim Se-jung, a market analyst at Shinyoung Securities in Seoul.
Hong Kong's Hang Seng <.HSI> also shook off early losses to climb 1.2 percent, extending a jump the previous day.
But Ping An Insurance <2318.HK> <601318.SS>, China's second-largest insurer, fell 2.7 percent after it said three of its mainland shareholders would sell shares over the next five years.
The news sparked a sell-off its Shanghai shares, helping drag down the main index <.SSEC> 0.7 percent.
Japan's benchmark Nikkei <.N225> fell 0.5 percent in thin trade but managed to bounce off its 25-day moving average after breaking above it in a 2.7 percent rise the previous day. <.T>
Exporters slipped and Toyota Motor Corp <7203.T> shares fell 0.5 percent after news it faces a criminal investigation into its handling of safety problems. Investors are also keen to see how President Akio Toyoda's testimony to Congress pans out after massive vehicle recalls in recent weeks.
On Monday, the Dow Jones industrial average <.DJI> fell 0.2 percent, the Standard & Poor's 500 Index <.SPX> fell 0.1 percent and the Nasdaq Composite Index <.IXIC> eased 0.1 percent.
San Francisco Federal Reserve Bank President Janet Yellen, who is not a voting member of the Fed's monetary policy-setting committee this year, said the U.S. economy still needed extraordinarily low interest rates, as inflation was undesirably low and growth was likely to be sluggish for several years.
The tension over rates kept the dollar in a tight range. The dollar index against major currencies <.DXY> eased 0.4 percent to 80.212, well below an eight-month high of 81.342 last week.
The euro edged up to $1.3626, up from a nine-month low at $1.3443 set last Friday, and also gained slightly on the yen.
It has been under steady selling pressure thanks to fiscal worries in Greece and other euro zone economies.
But traders said euro buying by the Swiss National Bank in Asian trade helped it up against the Swiss franc.
Oil was little changed at $80.30 per barrel, close to a six-week high hit on Monday, as forecasts for higher U.S. crude and gasoline stockpiles offset concerns that a strike at Total's French refineries would trigger fuel shortages.
Spot gold was steady at $1,115 an ounce, having rallied to its strongest in a month above $1,130 in the previous session.
(Additional reporting by Sui-Lee Wee in Hong Kong, Aiko Hayashi in Tokyo and Jungyoun Park in Seoul; Editing by Kim Coghill;