Asian stocks were steady near one-month highs on Tuesday as market players took a breather after five consecutive days of gains while the Australian dollar slipped ahead of a policy meeting of the country's central bank.

Expectations for a moderate slowdown in Asia that will bring inflation rates down has been attracting capital inflows and increasing bets on a second-half recovery in stocks. Some markets though, particularly Japan, may be ripe for some profit taking after recent gains.

Risky assets have been slapped around in the first half of the year by concerns ranging from worries about escalating inflation in Asia, Japan's nuclear scare to surging commodity prices and the impact of the end of U.S. quantitative easing.

On Tuesday though, stock markets in Australia <.AXJO> and Japan <.N225> were largely flat. Investors were on watch for an Australian central bank rate decision where it is almost certain to hold rates at 4.75 percent, but an accompanying statement might offer hints that it may be backing away from a tightening bias.

The MSCI index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> was broadly flat, holding near the highest since June 2. The index has been in a rising trend for the past two weeks.

British <.FTSE> and European <.FTEU3> shares ended higher on Monday even as Wall Street remained shut for a holiday.

In currency markets, the Australian dollar was under some pressure early in the session after local media in China speculated on a possible interest rate increase in China. It was down 0.3 percent to US$1.0710.

The euro hovered near a one-month high against the U.S. dollar before a much expected interest rate increase on Thursday where a hawkish European Central Bank might attract more buyers to the beleaguered currency.

In a sign that the euro's near term outlook has stabilized, it held above a key support line of $1.45 in early Asian trade, despite a warning from ratings agency Standard & Poor's on Monday that it would treat plans for a rollover of privately-held Greek debt being discussed as a selective default.

It was trading at $1.4526 and has managed to retain almost all of last week's 2.5 percent gain -- its best weekly performance since January.

With Greek default fears being relegated to the backburner for now, BNP Paribas strategists expect more real money investors and leveraged accounts to start buying euros if it becomes clear that any dips won't stay much below the $1.45 line.

Bond markets are fairly quiet with yields on ten-year U.S. Treasury notes holding above 3.18 percent, a rise of more than more than 30 basis points since last Monday.

U.S. crude futures stayed above the $95 per barrel line ahead of U.S. factory orders data later in the day.

(Additional reporting by Ian Chua in SYDNEY, Editing by Kevin Plumberg)

Japan China BNP Paribas Quantitative easing