HONG KONG (AFP) - Asian markets were mixed Tuesday, with Wall Street providing a tepid lead ahead of the US Federal Reserve's latest policy meeting, while oil sat at nine-month highs as traders nervously watch the crisis in Iraq.
The 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 added 0.40 per cent after sinking more than one percent on Monday, while Seoul put on 0.22 per cent. But Hong Kong lost 0.41 per cent, Shanghai shed 0.44 per cent and Sydney was off 0.26 per cent.
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.
In morning trade Tuesday in Asia the US benchmark, West Texas Intermediate for July, eased 10 US cents to US$106.80 after surging in recent days, while Brent crude for August gained five cents to US$112.99.
On Wall Street the three main share indexes ended last week lower but edged up slightly Monday, helped by a better-than-expected rise in US industrial production.
The Dow edged 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 US$10 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 early Tokyo foreign exchange trade the dollar was worth 102.01 yen compared with 101.84 yen in New York.
The euro bought US$1.3564 and 138.38 yen, up from US$1.3570 and 138.20 yen.
Gold fetched $1,271.13 an ounce at 0210 GMT compared with US$1,280.00 late Monday.