Asian shares eked out small gains and the dollar remained under pressure on Thursday on growing expectations that the US Federal Reserve's impending stimulus reduction might be smaller than some had believed.
The waning likelihood of an immediate US military strike on Syria also continued to undermine the dollar. The five permanent veto-wielding powers of the UN Security Council met in New York on Wednesday to discuss plans to bring Syria's chemical weapons under international control.
MSCI's broadest index of Asia-Pacific shares outside Japan managed a gain of about 0.1%, though it wavered in and out of negative territory.
A stronger yen and downbeat economic data helped push Japan's Nikkei stock average down 0.3%. Data released earlier on Thursday showed Japan's core machinery orders were unexpectedly flat in July, a weak spot in a run of strong recent data and a reminder that firms are still not confident enough about the economy's recovery to aggressively increase capital expenditure.
The Fed's next move remains a key focus for global markets. The Federal Open Market Committee meets next Tuesday and Wednesday and is widely expected to begin scaling back its $85 billion monthly asset-buying programme.
Friday's disappointing US jobs data prompted many to believe the reduction will be modest. "With threats of an immediate US attack on Syria subsiding, the market focus is moving to the Fed's meeting.
The market's conviction that the Fed will go ahead with reducing stimulus has weakened a little bit after the payroll data last week," said Katsunori Kitakura, associate general manager of market-making at Sumitomo Mitsui Trust Bank in Tokyo.
A Reuters survey earlier this week showed most economists see the US central bank trimming its asset purchases by about 10 billion.
One regional standout was New Zealand's currency, which jumped to a four-week high of $0.8151 after the Reserve Bank of New Zealand held its benchmark cash rate steady at 2.5% as expected. It said it would likely hold interest rates for the rest of the year but that rates would start to rise by mid-2014.
"As these are the most hawkish comments that we have heard from a major central bank, investors could start to see the New Zealand dollar in a new light and drive the currency up another 3 to 5%," BK Asset Management managing director Kathy Lien said in a note to clients.
But the Australia dollar went the other way, after a surprising drop in employment in August pushed the jobless rate up to a four-year high and revived the chance of a cut in interest rates.
The Aussie earlier touched a six-month high of $0.9353 before the data, but was last down about 0.8% at $0.9258.
The dollar index slipped about 0.1% to 81.429, after having fallen below its 200-day moving average on Wednesday, moving away from a seven-week high of 82.671 hit on Sept. 5. The dollar bought 99.50 yen, down about 0.4%. It moved away from Wednesday's high of 100.60 yen, which was the highest since July 22, according to Reuters data.
The euro was slightly higher at $1.3318 after rising as high as $1.3324 on Wednesday, its highest since Aug. 29. Reduced expectations of Fed tapering have eased pressure on emerging market currencies that recently sold off amid fears of capital outflows.
That buys some time for the central banks of Indonesia, the Philippines and South Korea, which all have to consider the impact of eventual Fed stimulus reduction.
South Korea's central bank kept interest rates unchanged for a fourth consecutive month on Thursday, as expected.
Markets like Brazil and India, which must import capital to finance spending, will feel the effects of the reduction more than countries such as Mexico and South Korea, which are less dependent on foreign funds. On the commodities front, copper slipped 0.3% to $7,148.50 a tonne, on subdued interest ahead of next week's Fed decision.
An improved outlook for China's economy and reduced risk of a US strike on Syria have helped bring copper prices off three-year lows plumbed in late June, but supply concerns remain.
Gold edged slightly down to up to $1,364.96 an ounce, after touching a three-week low of $1,356.85 on Wednesday. Oil was slightly higher, with Brent crude trading at $111.54.
Brent prices spiked above $117 a barrel LCOc1 in late August on the virtual shutdown of Libyan oil output and the prospect of US military action against Syria.
Saudi Oil Minister Ali al-Naimi said on Thursday that the global oil market is well balanced and top exporter Saudi Arabia is ready to supply whatever volume of crude is needed to meet demand.