* U.S. State of the Union address largely as expected
* Markets waiting for Fed statement later on Wednesday
* Euro hovers just below two-month high
(Adds comment, updates prices)
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 U.S. Federal Reserve, which is expected to
reaffirm the central bank's focus on supporting growth.
U.S. stock index futures prices ticked higher after U.S.
President Barack Obama delivered the annual State of the Union
address, pointing to a modestly firmer opening on Wall Street on
Wednesday.
Obama proposed a freeze on domestic spending over the next
five years to help reduce the national deficit but analysts said
the speech provided no surprises.
"The stock market should be fine with the spending freeze,"
said Christopher Low, chief economist at FTN Financial in New
York. "People don't want additional stimulus here. This will
allow investors to focus on the Fed."
Japan's Nikkei average fell 0.4 percent, giving back
some of the previous day's 1 percent rally, though other Asian
markets ticked up slightly.
The MSCI index of Asian stocks outside Japan
rose 0.1 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 $1.369, 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 results statement, although they rebounded
after the release on hopes business conditions for the firm may
now pick up.
It reported a record quarterly loss on weakness in its main
businesses but a one-third increase in its shares since lows in
November reflect expectations the worst may be over.
Underlining concerns that the rising cost of food could
become a broader inflation problem for many economies, Chicago
wheat prices rose around 1 percent in electronic trading on
Wednesday.
That pushed them to their highest level since August 2008 on
demand for high-quality wheat, which is in tight supply.
U.S. crude oil futures rose 37 cents to $86.56 per
barrel, following 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 $1,333.70 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.
(Additional reporting by Antoni Slodkowski in Tokyo; Editing by
Ron Popeski)
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