Asian shares rose on Tuesday as recent selling drew bargain hunters, but investors were cautious ahead of more U.S. economic reports and a Federal Reserve policy decision later in the week that may offer clues to the Fed's stimulus plans.
The MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.7 percent to snap a four-day losing streak, led by a 1.1 percent jump in Australian shares to a fresh 21-month high on gains in financial shares.
South Korean shares, which slumped to an 8-week low on Monday, rebounded 0.8 percent.
Japan's Nikkei stock average reversed earlier declines and rose 0.6 percent, buoyed by optimism over earnings of major banks. It briefly touched a fresh 32-month high above 11,000 on Monday.
The benchmark Standard & Poor's 500 Index eased slightly on Monday after an eight-day winning run but held above 1,500 points, after closing above that level on Friday for the first time in more than five years.
Risk appetite has been improving overall with U.S. earnings generally solid. A rise in a gauge of planned U.S. business spending in December added to a recent run of positive global economic data, along with signs of easing financial stress in the euro zone. Euro zone blue chips touched fresh 18-month peaks on Monday.
More solid U.S. growth indicators would, however, fuel speculation the Fed may consider pulling back on aggressive easing stimulus. The Fed ends a two-day policy meeting on Wednesday. The first estimate of U.S. fourth-quarter gross domestic product also will be released on Wednesday, followed by non-farm payrolls on Friday.
"Ahead of key events, markets are likely to stay in ranges. But with yields on U.S. Treasury and German government bonds inching higher, one might say investors may be shifting funds to riskier assets from safe-havens," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo.
"That's part of the reason why the euro has stayed firm," he said.
Saito said while a rise in U.S. yields underpins the dollar against the yen, they were likely to be capped with end-month selling from exporters and options lined up between 90.50 and 91.50 yen.
The benchmark U.S.