(Reuters) - Asian shares paused Tuesday as investors grew cautious ahead of monetary policy meetings by the European Central Bank and the U.S. Federal Reserve, with scepticism countering expectations for more stimulus steps to support fragile global economies.

The impact of the three-year euro debt crisis on Asia was evident Tuesday with Japan's Manufacturing Purchasing Managers Index falling at its fastest pace since last year's earthquake and tsunami, as demand for Japanese goods slows in Europe and China.

Market sentiment has been underpinned by speculation that the ECB, at a meeting on Thursday, may resume its bond buying program to shoot down rising Spanish and Italian borrowing costs, but uncertainty remained partly because Germany has repeated its opposition to such a step.

The Fed has also come under greater pressure to act as recent data for the third quarter has disappointed, but many economists do not expect further easing until September. The Fed starts a two-day interest rate policy meeting on Tuesday.

"With the market at a crossroads between satisfaction and disappointment, investors have little choice other than to sit on the sidelines for now and see what the central banks do," said Kim Soo-young, an analyst at KB Investment & Securities.

MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> was up 0.1 percent after touching a three-week high on Monday. The index was set for a monthly gain of about 2.2 percent, compared to a near flat showing last July.

U.S. stocks finished mostly flat on Monday as investors paused following the best two-day run this year, while European shares hit three-month highs to end above a key technical level.

Japan's Nikkei stock average <.N225> opened down 0.4 percent, after hitting a one-week high on Monday. .T

The euro steadied at $1.2263,, below a three-week high of $1.2390 touched on Friday but well above a two-year low around $1.2042 reached last week.

The Australian dollar held near a four-month high against the U.S. dollar of $1.0508 and an all-time peak versus the euro around A$1.1646, both reached in offshore trade, as speculation of monetary stimulus spurred investor appetite for high-yielding currency.

"We expect that the Fed will choose to wait for more decisive data and that the ECB measures will be watered down versus market expectations - and will likely boost market volatility and increase demand for safer assets such as the USD," said Barclays Capital analysts in a research note.

"More fundamentally, it seems to us that the market response to policy initiatives from the ECB or anywhere else should be conditioned by the degree to which they address the deeper drivers of the economic and financial problem," they said.

More evidence emerged of the euro zone debt crisis damaging economic activities and dampening morale.

The Markit/JMMA Japan Manufacturing Purchasing Managers Index showed on Tuesday it fell to a seasonally adjusted 47.9 in July from 49.9 in June.

On Monday, the European Commission's sentiment index showed the euro zone's business sentiment fell to a 34-month low in July, near levels last seen after the collapse of Lehman Brothers.

Expectations for an imminent ECB action supported Italy's debt auction on Monday, with Rome selling 5.48 billion euros in bonds, near the top of its planned issue range, and benchmark 10-year borrowing costs falling below 6 percent for the first time since April. But 10-year yields stayed elevated near 6 percent.

Asian credit markets held steady, after the spread on the iTraxx Asia ex-Japan investment-grade index fell to its lowest since early April on Monday in thin trading volumes.