Asian shares inched up on Tuesday with softer commodity prices weighing on Australian stocks, while the New Zealand dollar hit a 13-month high on signs of a recovery in prices for the country's key dairy exports.
The U.S. dollar ran out of steam, holding steady at around 92 yen, as short covering waned, after it jumped on Monday to as high as 92.53 yen. However, analysts do not expect the U.S. currency to slip much ahead of a U.S. Federal Reserve monetary meeting beginning later Tuesday and a G20 summit this week.
Volumes were capped as Japanese financial markets are closed until Thursday for public holidays.
Malaysian and Indonesian markets were also closed for public holidays.
In Australia, shares were little changed, dampened by an overnight drop in commodities prices although gold edged back up in Asian trade and oil recovered to just below $70 a barrel.
South Korean shares climbed 1 percent, helped by gains in tech stocks but telecom shares fell on worries that tariffs will be slashed.
Treasury bond futures fell after the Bank of Korea said it was ready to use monetary policy to help calm rising property prices.
We will take proper steps (against rising property prices) including monetary policy if necessary, taking a look at conditions of financial markets and the economy in the future, the central bank said in a draft version of a report to parliament obtained by Reuters.
China shares were slightly higher but investors across the region were subdued after the Dow Jones <.DJI> dipped 0.4 percent on Monday and demand concerns depressed commodities prices.
The MSCI index of Asia Pacific stocks traded outside Japan edged up 0.7 percent and the Asian Development Bank raised its growth forecasts for developing Asia to 3.9 percent for 2009, from 3.4 percent, and lifted its 2010 forecast to 6.4 percent from 6 percent.
The U.S. Federal Reserve begins a two-day monetary policy meeting on Tuesday and while it is likely to hold interest rates, markets will be watching for any comments indicating the Fed might wind back its super-accommodative policy stance given improving economic data. That would be a boost for the dollar if it does, analysts said.
Oil prices picked up after Monday's fall on renewed concern about weakness in energy demand while commodities prices were steady after the Reuters-Jefferies CRB index of commodities <.CRB> tumbled 2.2 percent in New York trade, its largest percentage drop in five weeks.
Dairy prices, in contrast are showing signs of rebounding, pushing the New Zealand dollar to a 13-month high above $0.7159, after the country's Fonterra group, the world's largest dairy exporter, raised its estimated payout to farmer shareholders for the 2009/10 season by 12 percent.
Fonterra generates about 7 percent of New Zealand gross domestic product.
The Kiwi, which has rallied more than 40 percent from a six-year low plumbed in early March, was also supported by current account data that showed New Zealand's second quarter deficit at its lowest level in nearly five years.
Australia lifted its production forecast for metals including iron ore and copper, predicting that China will remain a fervent buyer, but cut its export earnings estimate because of lower prices.
(Additional reporting by Chang Tae-min and Cheon Jong-woo in Seoul; Editing by Tomasz Janowski)