* Nikkei down 0.4 pct in early trade
* Markets waiting for Fed statement
* Euro hovers just below two-month high
By Daniel Magnowski
SINGAPORE, Jan 26 (Reuters) - The U.S. dollar held near a
10-week low against a basket of currencies on Wednesday, ahead
of a statement from the Federal Reserve which is expected to
reaffirm the central bank's focus on supporting growth.
In his State of the Union address, U.S. President Barack
Obama proposed a freeze on domestic spending over the next five
years, a move which was largely expected by markets and which
Obama said would help reduce the national deficit.
In Asia, Japan's Nikkei average fell 0.5 percent in
early trade, giving back some of the gains made in the previous
day's 1 percent rally, though other Asian markets ticked up
slightly.
The MSCI index of Asian stocks outside Japan
rose 0.3 percent. Since the start of the year ,it has
underperformed the MSCI world index , which has
risen almost 2 percent.
Emerging Asian markets rose powerfully in 2010, but since
then some investors have taken profit, and some pulled money out
of economies they fear are the most vulnerable to the harmful
effects of inflation, a growing global concern.
"Worries over monetary tightening will persist in the long
term, weighing especially on shares of producers dependent on
raw materials as their prices are still near all-time highs,"
said Masayuki Otani, chief market analyst at Securities Japan
Inc.
The perception that the U.S. Federal Reserve will maintain a
much easier policy than the European Central Bank, which is
worried about inflation, has helped boost the euro to near a
two-month high.
At $1.367, the euro hovered just below Tuesday's
two-month high of more than $1.37, which it achieved partly on
the strength of Asian buying of the euro zone's debut European
Financial Stability Facility bonds .
A pledge by the Fed which concludes a two-day policy meeting
on Wednesday, to continue its $600 billion bond-buying plan
could further help the euro versus the dollar, analysts said. A
statement will be released at around 1915 GMT on Wednesday.
Shares in LG Electronics , the world's No. 2 TV
brand and No. 3 mobile phone maker, fell around 4 percent ahead
of its fourth-quarter result statement, in which it is expected
to report a sharp loss.
U.S. crude oil futures were up 15 cents at $86.32 per
barrel, ending six days of consecutive losses during which
prices fell by almost 6 percent. Those losses were driven by
expectations of large U.S. oil inventories, and concerns among
investors and policymakers that high commodities prices are
fuelling inflation, which in turn may slow economic growth.
Gold was little changed at $1,333.90 per ounce. It
hit a three-month low of $1,322.70 on Tuesday, knocked by
falling investor demand as an improving economic outlook lessens
gold's appeal as an asset which gains in value while other
financial instruments appear at risk.
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(Additional reporting by Antoni Slodkowski in Tokyo; Editing by
Ron Popeski)
