Asian markets were mixed, following a tepid lead from Wall Street ahead of a US Federal Reserve policy meeting, while oil edged down a touch from nine-month highs as traders nervously watch the crisis in Iraq.
The US dollar nudged a little higher against the yen after the previous day's sell-off, but the uncertainty caused by events in the Gulf kept gains to a minimum.
Tokyo on Tuesday closed 0.29 per cent, or 42.68 points, higher to finish at 14,975.97 after sinking more than one per cent on Monday, while Seoul gained 0.40 per cent, or 7.96 points, to 2,001.55.
But Sydney gave up 0.21 per cent, or 11.6 points, to end at 5,400.7 while Shanghai slipped 0.92 per cent, or 19.29 points, to 2,066.70. Hong Kong slid 0.42 per cent, or 97.08 points, to 23,203.59.
With few economic catalysts to drive trade, Iraq has dominated investors' attention as militants sweep across the country, taking over key cities and heading for Baghdad.
On Monday, the jihadists battled government forces for control of a strategic northern town, while US officials considered using drone strikes against the rebels.
The fighting has raised fears over supplies of oil from Iraq, a key exporter, sending prices rocketing to highs not seen since September.
On Tuesday, dealers cashed in some of those gains, although losses were limited. In the afternoon, US benchmark West Texas Intermediate for July delivery fell 39 US cents to $US106.51 a barrel in afternoon trade, while Brent crude for August declined 42 US cents to $US112.52.
On Wall Street, the three main share indexes ended lower last week, but edged up slightly on Monday, helped by a better-than-expected rise in US industrial production.
The Dow was up 0.03 per cent, the S&P 500 tacked on 0.08 per cent and the Nasdaq rose 0.24 per cent.
Attention will now turn to the Fed's policy meeting that wraps up on Wednesday.
Expectations are for the bank to cut a further $US10 billion from its monthly stimulus spending and keep interest rates at record lows. Investors are more interested in what chief Janet Yellen has to say about future policy.
Kathy Lien, managing director at BK Asset Management, said the Fed could tweak its forecasts for the year to trim its unemployment projection and raise its estimate for inflation.
If that happens, "Yellen will need to provide an explanation that convinces the market (the Fed) hasn't gotten any closer to tightening", Lien said. "If she fails, the US dollar and Treasury yields will rise."
In afternoon Tokyo foreign exchange trade, the US dollar was worth Y102.00 compared with Y101.84 in New York.
The euro bought $US1.3557 and Y138.29, up from $US1.3570 and Y138.20.
Gold fetched $US1,266.41 an ounce at 1810 AEST compared with $US1,280.00 late on Monday.
In other markets:
- Taipei added 0.41 per cent, or 37.67 points, to 9,240.6.
Taiwan Semiconductor Manufacturing Co was 0.81 per cent higher at $Tw125.00 while leading chip design house MediaTek gained 2.72 per cent to $Tw510.00.
- Wellington rose 0.28 per cent, or 14.70 points, to 5,193.50.
Fletcher Building was up 0.34 per cent at $NZ8.96 and Telecom added 1.10 per cent to $NZ2.75.
- Manila closed 0.79 per cent lower, shedding 53.52 points to 6,704.93.
Philippine Long Distance Telephone fell 0.14 per cent to 2,846 pesos while Ayala Land tumbled 3.19 per cent to 30.30 pesos.
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