TOKYO (Reuters) - Asian shares flirted with three-week highs on Wednesday, while the euro wobbled close to five-week lows on heightened speculation of more European Central Bank stimulus next month.
MSCI's broadest index of Asia-Pacific shares outside Japan added 0.4 percent after hitting its highest level since April 23.
But Japan's Nikkei bucked the trend, slipping 0.3 percent and moving away from the previous session's 1-1/2-week high as investors took profits.
A weaker-than-expected U.S. retail sales report on Tuesday did little to change views the economy was poised for faster growth this quarter.
"The U.S. tapering is still going on and it looks like the U.S. economy is still going strong, meaning people in emerging Asia are taking a cautious view," said Kyoya Okazawa, head of global equities and commodity derivatives at BNP Paribas in Tokyo.
Indonesia was an exception to this caution on Wednesday, with Jakarta shares adding 0.8 percent. They earlier rose to their highest in nearly a year, after Jakarta Governor Joko "Jokowi" Widodo boosted his chances in the July presidential election by securing the support of the country's second-largest political party.
Investors continued to warily monitor the ongoing crisis in the Ukraine, where pro-Russian separatists ambushed Ukrainian troops on Tuesday, killing seven.
On Wall Street overnight, U.S. stocks ended flat. The retail sales figures dented the dollar only slightly and the S&P 500 managed to eke out its 10th record closing high of the year after the release.
"The lack of a reaction to such a critical report has to do with the belief that the slowdown in spending will not distract the central bank from its plans to taper asset purchases by $10 billion at each successive meeting," Kathy Lien, managing director of FX strategy at BK Asset Management, wrote in a note to clients.
The weakness of retail sales helps explain why the Federal Reserve has not set a clear time frame for its first interest rate hike, she added.
By contrast, the likelihood of easing action increased in the euro zone. The Bundesbank is ready to support ECB policy steps if they are warranted and this stance is not new, two Bundesbank sources said on Tuesday.
A weak German ZEW survey of investor sentiment lent credence to the view that the ECB has reason to take further action next month.
The euro last traded at $1.3713, up about 0.1 percent on the day, after it dropped as low as $1.3688 on Tuesday. A break below the April 4 trough of $1.3672 would take the single currency back to levels not seen since late February.
The pressure on the euro helped support the dollar index, which was slightly down on the day at 80.051, but remained not far from Tuesday's five-week high of 80.180.
Against its Japanese counterpart, the dollar edged down about 0.1 percent to 102.17 yen, after rising as high as 102.35 yen on Tuesday, its highest since May 2.
In commodities trading, U.S. crude added about 0.3 percent to $101.96 a barrel, extending Tuesday's two-week highs hit on expectations that weekly inventory reports will show record-low stockpiles.
Spot gold inched up to $1,293.20 an ounce.
Editing by Shri Navaratnam and Eric Meijer