TOKYO/SINGAPORE - Asian shares recovered from a wobbly start on Tuesday, but remained on track for a monthly loss, while the dollar edged away from recent peaks scaled on expectations the US Federal Reserve will raise interest rates as soon as next month.
MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.4 per cent, poised to end the month down 1.9 per cent.
Japan's Nikkei stock index slipped 0.5 per cent after rallying 1.4 per cent in the previous session. It is up 2.9 per cent for May, thanks to a tailwind from a weaker yen.
Data released earlier in the session showed Japanese industrial output unexpectedly rose 0.3 per cent in April, suggesting production is holding up despite weak exports and the impact from a series of earthquakes that struck southern Japan during that month.
China's CSI 300 gained 2.1 per cent and the Shanghai Composite advanced 1.9 per cent, on track for monthly losses of 0.7 per cent and 2.1 per cent respectively.
Hong Kong's Hang Seng index gained 0.9 per cent, heading for a decline of 1.2 per cent in May.
Underpinning Asian sentiment, European shares hit one-month highs on Monday amid otherwise light trade with markets in London and New York closed for public holidays.
"The focus will be on US data," Bernard Aw, market analyst at IG in Singapore, wrote in a note. "Investors will be keen to see if US data this week will corroborate the Fed's slightly optimistic tone."
The dollar has surged recently on expectations of higher US interest rates after Fed Chair Janet Yellen said on Friday that the central bank should hike rates "in the coming months" if economic growth picks up and the labour market continues to improve.
Against that backdrop, the May US private-sector ISM manufacturing data, due Wednesday, and non-farm payrolls report on Friday will garner even more attention than usual. Solid readings could further heighten expectations for a move as soon as the Federal Reserve's next policy meeting on June 14-15.
Economists predict the jobs report will show that US employers added 170,000 jobs, slightly more than they did in April. Hourly wages are expected to show a 0.2 per cent increase from the previous month.
The dollar index, which tracks the greenback against a basket of six rival currencies, held steady at 95.574, not far from a two-month high of 95.968 and up nearly 2.7 per cent for the month.
Against the yen, the dollar was little changed at 111.080. But it rose to as high as 111.455 in the previous session, its loftiest peak in a month, and is on track to notch a gain of 4.4 per cent in May.
The euro was also flat at $1.11470 (S$1.5) but hovered near a 2-1/2 month low of $1.1097 hit in the previous session. It is set to end the month 2.7 per cent lower.
Moves in crude oil futures were limited ahead of Thursday's meeting of the Organisation of the Petroleum Exporting Countries. Most analysts did not expect any changes in the group's production.
There was no Monday settlement for US crude futures because of the US Memorial Day holiday. They were up 0.5 per cent at $49.55 on Tuesday, lifted by the start of the peak demand summer driving season in the US They are set for an 8 per cent jump in May.
Brent crude futures were steady at $49.73 a barrel, poised for a gain of 3.3 per cent for the month.
While a softer dollar on Tuesday gave gold a boost, the recent recovery in risk sentiment pushed the precious metal to its biggest monthly decline since November.
Spot gold climbed 0.7 per cent to 1,213.00 per ounce, but was headed for a slide of 6.2 per cent for the month.