* Japan's Topix hits 19-month low, Nikkei touches 7-week
low
* Dollar holds overnight gains ahead of Fed meeting
* Australian dollar surges after cbank raises rates
* Investors cautious before Fed, U.S. vote
By Sugita Katyal
SINGAPORE, Nov 2 (Reuters) - Asian stocks edged up after an
early fall while the dollar kept a tenuous grip on overnight
gains in Asia on Tuesday ahead of U.S. elections and a Federal
Reserve meeting that is expected to ease monetary policy.
European markets opened a tad weaker after rising for three
consecutive sessions.
The Australian dollar leapt after Australia's central bank
surprised markets and raised interest rates as a pre-emptive
strike against inflation.
The MSCI index of Asia Pacific stocks outside of Japan
<.MIAPJ0000PUS> recovered after early falls to rise 0.4 percent
on gains in energy and materials and Hong Kong's Hang Seng
Index <> was also up after Chinese banks extended gains.
Japan's Nikkei share average <> closed up 0.1 percent
after touching a seven-week low though the broader-based Topix
index <> shed 0.02 percent to a 19-month closing low,
under pressure from the yen's strength as it hovers close to a
record high against the dollar.
They are down 13 percent and 12 percent so far this year,
respectively.
Analysts said the Topix has been hit particularly hard by a
downbeat performance in the banking sector, on worries about
stricter global banking regulations, and by a series of equity
financings.
"The market is of course cautious until it sees the outcome
of the Fed meeting and the U.S. election, but Japanese stocks
are being pressured more by selling from real money investors,"
said Hiroaki Kuramochi, chief equity marketing officer at Tokai
Tokyo Securities.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a preview on the Fed meeting []
For analysts' views see []
For a PDF special report: http://link.reuters.com/pyb23q
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
"Japanese banking shares are also pressured by Basel, as
they are part of the global banking sector. With uncertainty
over the outlook for European banking shares remaining, it may
be inevitable that those shares are taken out of portfolios."
Under new global banking regulations proposed last month,
known as "Basel III," banks will be required to hold
top-quality capital worth at least 7 percent of their
risk-bearing assets -- more than three times current
requirements. []
MONETARY EASING
The dollar gave up some overnight gains in ranges that
tightened ahead of the Fed's policy meeting where it is widely
expected to announce a second round of monetary easing.
Markets generally have priced in for the central bank to
commit to buying at least $500 billion in Treasury debt over
the coming months to spur a flagging economy. The Fed is also
expected to announce a programme of large-scale asset
purchases.
The Fed will announce the outcome on Wednesday.
The dollar edged up to 80.56 yen <JPY=> though it remained
within sight of a record low of 79.75 yen set in 1995. Markets
were keeping a wary eye on the pair, with the risk of Japanese
intervention seen mounting if the dollar slips below 80 yen.
"The market is turning cautious ahead of the Fed's meeting.
As the market position has been overwhelmingly short in the
dollar, the psychology at work here is that you should unwind
your position," said a trader at a Japanese bank.
The Australian dollar <AUD=D4> surged 1.1 percent on the
day after the central bank raised interest rates by 25 basis
points to 4.75 percent.
Most investors had expected the Reserve Bank of Australia
to hold rates steady at 4.5 percent after last week's benign
inflation report. The Australian dollar rallied as far as
$0.9981, from $0.9885 before the rate decision was announced.
India's central bank raised interest rates for the sixth
time this year to tame inflation, and indicated that the
increase was likely to be its last in the near term. The
Reserve Bank of India (RBI) raised its lending and borrowing
rates by 25 basis points each, as expected by most analysts.
Gold ticked up after a drop from a two-week high spurred
bargain hunting, but investors were reluctant to make big bets
ahead of the Federal Reserve's policy meeting, which could
determine the fate of the dollar.
Gold <XAU=> was up $5.1 to $1,355.35 by 0504 GMT, after
hitting a two-week high at $1,365.49 in Asia on Monday. Gold
struck a record around $1,387 last month.
Oil also edged higher with investors cautious ahead of the
expected monetary easing from the U.S. Federal Reserve, capping
gains from Saudi Arabia's upward shift in price tolerance.
U.S. crude for December <CLc1> rose 12 cents to $83.07 a
barrel at 0258 GMT, while ICE Brent <LCOc1> nudged two cents
higher to $84.64.
The Fed's pending announcement overshadowed comments from
Saudi's Oil Minister Ali al-Naimi on Monday that consumers
would be comfortable with oil prices rising as high as $90 a
barrel. []
(Editing by Kazunori Takada)
