HONG KONG (Reuters) - Asian stocks edged lower on Tuesday and the dollar hovered above a record low against a basket of major currencies as investors held their fire ahead of a U.S. Federal Reserve policy-setting meeting that is expected to cut interest rates.
Crude oil prices also eased following a four-day rally to a record high of $93.80 a barrel and gold <XAU=> retreated from a 28-year peak of $794.40 an ounce as its five-day run sputtered to a halt.
Due to kick off later in the day, the two-day Fed meeting is widely expected to conclude with another cut to the 4.75 percent fed funds rate as the U.S. central bank tries to stave off economic fallout from a housing slump and credit market problems.
At the September meeting, the Fed slashed interest rates by a bold 50 basis points, setting alight global stock markets.
"The move this time would be mainly symbolic, with the Fed wanting to show it's prepared to respond to any problems, rather than flooding the market with cash," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.
"This would also give them the leeway for another cut later on if it's needed."
By 0205 GMT, Tokyo's Nikkei (.N225: Quote, Profile, Research) had eased 0.7 percent, reversing Monday's 1.2 percent rise, while MSCI's measure of other Asia Pacific stocks slipped 0.4 percent.
On Monday, the MSCI index climbed 2.5 percent to a second straight record closing high, bringing total gains this year to 48 percent -- more than triple the gains for MSCI's main world equity index.
EARNINGS EYED
Investors punished firms that had disappointed in their earnings outlook, sending microchip tester maker Advantest Corp (6857.T: Quote, Profile, Research) down a further 3.4 percent, after Monday's near 7-percent tumble sparked by its profit outlook cut.
Kookmin Bank (060000.KS: Quote, Profile, Research) also fell 3.4 percent a day after the South Korean lender forecast a tough year ahead and a squeeze on margins, while Seiko Epson (6724.T: Quote, Profile, Research) dropped 6.0 percent after it slashed its profit forecast for the year to March 2008.
Resource stocks in the region, which have gained strongly in recent sessions on the back of rallying commodity prices led by oil, were mostly softer.
Mining giant BHP Billiton (BHP.AX: Quote, Profile, Research) eased 0.3 percent, Australia's oil and gas producer Woodside Petroleum (WPL.AX: Quote, Profile, Research) shed 1.5 percent, top zinc refiner Korea Zinc (010130.KS: Quote, Profile, Research) slipped 2.1 percent and gold miner Newcrest Mining (NCM.AX: Quote, Profile, Research) fell 2.1 percent.
U.S. crude lost 80 cents to $92.75, while gold slipped to about $786 an ounce.
DOLLAR STEADIER
After five straight sessions of declines, the dollar found a steadier footing. The dollar's trade-weighted index against six major currencies (.DXY: Quote, Profile, Research) edged up 0.1 percent to 76.925, off Monday's trough of 76.777 -- the lowest in the index's more than 30-year history.
The euro bought about $1.44, retreating from a peak near $1.4440, and 164.80 yen, off Monday's high at about 165.50 yen.
Against the Japanese unit, the dollar fetched 114.48 yen, slightly below late New York levels.
"With the market seeing a 25 basis point rate cut by the Fed this week as a done deal, players feel comfortable selling the dollar," said a trader at a big Japanese bank.
Safe-haven government bonds were little changed ahead of the Fed meeting, with the yield on the benchmark Japanese 10-year bonds up just half a tick at 1.61 percent.