Asia shares steady, dollar strong as markets reassess rates outlook

Asian stock markets recovered somewhat on Tuesday after suffering steep losses in the previous 24 hours, while the US dollar remained strong as investors anticipated that interest rates in many developed economies would remain higher for longer.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4% after US stocks ended the previous session slightly lower. So far this month, the index is up 0.8%.

The S&P/ASX200 in Australia was up 0.13 percent, while the Nikkei in Japan was up 0.26 percent.

The Hang Seng Index in Hong Kong opened 0.68 percent higher, while China's bluechip CSI300 Index was 0.33 percent higher in early trade.

When the Reserve Bank of Australia (RBA) meets later today, it is expected to extend its monetary tightening campaign.

According to sources, the central bank is likely to raise the official cash rate by another 25 basis points to 3.35 percent. At 0330 GMT, the decision will be made public.

"Market sentiment is dominated by central banks and the repricing of rates yet again," said Kerry Craig, JPMorgan Asset Management's global market strategist, according to sources.

"Equities have had a strong run since the start of the year so seeing an air pocket emerge now is no major surprise.

"It's been a quiet week for global economic data, and when that happens, uncertainty over interest rates is the dominant theme among investors."

The yield on benchmark 10-year Treasury notes reached 3.6268 percent during the Asian trading session, up from 3.632 percent on Monday.

The two-year yield, which rises as traders expect higher Fed fund rates, reached 4.4368 percent, compared to 4.456 percent at the close in the United States.

The repricing of higher rates began following January's strong job growth in the United States, with employment rising 517,000, more than doubling economists' expectations. The unemployment rate fell to 3.4%, the lowest level in more than 53 years.

Investors will be paying close attention to Federal Reserve Chairman Jerome Powell's speech at the Economic Club of Washington later on Tuesday.

Overnight on Wall Street, the Dow Jones Industrial Average fell 0.1%, the S&P 500 fell 0.6%, and the Nasdaq Composite fell 1%.

"The market has repriced to expect that the Fed Funds rate will peak just above 5 per cent and it now only anticipates very limited rate cuts, just one of 25 basis points by the end of this year," ANZ economists wrote.

"It's very clear that sentiment is fragile and data dependent, and this new defensive posture may have further to run near term as risk positions are scaled back."

The dollar eased 0.04 per cent against the yen to 132.6, after touching a three-week high of 132.9 during the U.S trading session.

The European single currency was up 0.1 per cent on the day at $1.0736, having lost 1.16 per cent in a month.

The dollar index, which tracks the greenback against a basket of major trading partner currencies, was down marginally at 103.47 from its U.S. trading levels. However, it remains well above its recent low of 101.55 on Feb 3.

U.S. crude ticked up 0.9 per cent to $74.78 a barrel. Brent crude rose to $81.69 per barrel.

Gold was slightly higher. Spot gold was traded at $1871.65 per ounce.