Asian markets kept their nerve on Wednesday counting on the Federal Reserve to launch only a modest scaling back of stimulus later in the day, though all assets were vulnerable to any hint of hawkishness from the world's most powerful central bank.
Expectations are that the Federal Open Market Committee (FOMC) will be measured with any cuts to its $85 bln in monthly asset buying, while also seeking to reassure investors that the day of an actual policy tightening is still distant.
That kept the dollar pinned near a four-week trough against a basket of major currencies, as the euro crept up to $1.3360 and nearer the week's peak of $1.3385.
On the yen, the greenback idled at 99.20 around the middle of its recent 98.45-100.62 range.
After months of speculation about the Fed's intentions, caution ruled in most stock markets ahead of the looming decision, with MSCI's broadest index of Asia-Pacific shares outside Japan off a slight 0.2%. Shanghai shares eased 0.2%, as did Australia's main index .
Japan's Nikkei was the main standout with a jump of 1.35%, after reaching its highest since late July.
Stock futures in Europe pointed to smalls gains of 0.2 to 0.3% for Germany and France.
For the Fed, consensus has congealed around a reduction of $10-$15 bln a month with all purchases ending by the middle of next year. Yet even that cautious timetable would be contingent on the economy performing as well as hoped.
With such an outcome largely priced in, it could lead Treasuries and the dollar to rally modestly. A slower tapering would tend to benefit bonds and stocks but hurt the dollar.
The bigger reaction would likely come if the Fed pulled back more aggressively, as that would lead market to price in an earlier start to rate rises as well.
That would be especially painful for emerging market countries that rely on foreign capital to fund current account deficits, with India and Indonesia among the most vulnerable.
As well as the tapering, the Fed may choose to alter its threshold for tightening, perhaps by lowering the trigger level on unemployment from the current 6.5%.
It will also publish its first economic forecasts for 2016 and the stronger the picture the harder it will be to convince markets that any future rise in interest rates will only be slow and measured.
The decision and economic projections are out at 1800 GMT while Fed Chairman Ben Bernanke starts his press conference half an hour later. Often markets can react violently to the former, then completely reverse course depending on what Bernanke says.
While yields on 10-year Treasury notes were a tick lower at 2.84% on Wednesday, that is up from just 1.62% back in May before the Fed first raised the spectre of tapering.
For commodities, the more dovish the outcome from the Fed the more supportive for prices. Copper futures were a 0.5% firmer at $7,109.75 on Wednesday, though still down 11% for the year so far.
Spot gold eased back to $1,297.89 an ounce as dealers took a "just in case" attitude to the Fed.
Brent crude for delivery in November fell 16 cents to $108.03 a barrel, but U.S. crude for October delivery added 27 cents to $105.69 a barrel.
