Asian stocks rose on mild bargain buying after a sell-off last week, while the euro hovered near a nine-week high before a Fed meeting this week where it is expected to paint a cautious view of the world's biggest economy.
Central bank meetings in Japan, Malaysia and India this week will be a key factor as policymakers, especially in Mumbai, are seen raising interest rates further to tackle price pressures.
Concerns of rising inflation gave investors an excuse to book profits in some Asian markets after record rallies in 2010, but rather than heading for the exits, funds were being reallocated to countries seen having a better grip on price pressures.
The MSCI stocks index of Asian stocks outside of Japan rose by 0.2 percent after posting its worst weekly performance in nearly two months last week.
For the month it is down by a percent.
Sentiment was wary before a slew of corporate earnings this week and a U.S. Federal Reserve meeting on Wednesday where it is likely to leave policy unchanged and note a slight improvement in the economy's outlook.
On top of domestic earnings, investors may not want to take large positions before big U.S. events such as the FOMC meeting, said Kenji Shiomura, a market analyst at Daiwa Securities.
Flows into emerging market equity and bond funds continued, latest data for the third week of January from fund tracker EPFR Global showed.
Since the start of 2010 a total of $101 billion has flowed into emerging market equity funds of all types, it said.
The euro stayed above the $1.36 line, having burst through the key resistance level last Friday, helped by hawkish comments from the European Central Bank chief Jean-Claude Trichet which gave markets an excuse to cut short euro positions.
The euro has rallied some 6 percent in the past two weeks as demand from Asian central banks spurred wider buying in the common currency.
Spot gold edged up by 0.4 percent to $1,347 per ounce, after posting its third consecutive weekly loss.
U.S. crude futures stayed around the $89 a barrel mark, on expectations that their discount to European Brent crude could be narrowed by arbitrage trading after widening to its broadest level in almost two years.