SINGAPORE Asian stocks rose to their highest in a week, while the dollar hovered below an 11-month high against the yen on Tuesday, supported by recent signs of improvement in the U.S. economy, ahead of a policy decision by the Federal Reserve.
Bank of Japan's policy meeting, which began on Monday, will also remain in focus. The bank is expected to hold rates as the economic outlook and risks have not changed much since its last meeting nearly a month ago.
The dollar held steady at 82.24 yen, not far from a high of 82.65 yen touched on Friday on trading platform EBS after a boost from upbeat U.S. jobs data.
In the stock market, Japan's benchmark Nikkei share average rose 0.9 percent, buoyed by demand for defensive sectors such as real estate, edging close to a seven-month high hit the previous day.
The MSCI's index of Asia Pacific shares outside of Japan also added 1.3 percent and reached its highest since March 5 at one point after slipping on Monday on concerns about a moderation in Chinese demand.
Australian shares rose 1.2 percent, underpinned by a recovery in the mining sector, while South Korean shares gained 1.2 percent as exporters and growth stocks rebounded.
The U.S. Federal Reserve's policy statement on Tuesday will be closely watched, particularly after last Friday's data showed an encouraging gain of more than 200,000 jobs in February for a third straight month.
Recent signs of improvement in the world's biggest economy have given a boost to the dollar and caused a rethink on how aggressive the Fed needs to be in applying further stimulus.
A focal point during Asian trade will be the Bank of Japan's policy decision, which is expected around 0330-0530 GMT.
The Bank of Japan is expected to refrain from easing monetary policy further on Tuesday, while stressing its readiness to act again in coming months if needed and extending a cheap loan line supporting growth industries.
"Although the market does not expect additional moves by the BOJ today, and the U.S. (Federal Reserve) is expected to string markets along with hopes for QE3, there is really no other news to trade on," said Hajime Nakajima, a sales trader at Cosmo Securities in Osaka.
The BOJ's monetary policy has been in the spotlight after its surprise easing in February, when it expanded its asset-buying scheme by 10 trillion yen and set a 1 percent inflation goal, triggering a broad slide in the yen.
Currency traders have said that there has been some market speculation that the BOJ may conduct more monetary easing on Tuesday, an outcome that could spark another sell-off in the Japanese currency.
Gold edged up to $1,703.79 an ounce, while crude oil futures rose 0.6 percent to $106.97 after falling on Monday on China fears and concerns about recession in Italy.
(Additional reporting by Mari Saito in Tokyo; Editing by Ramya Venugopal)