Asia shares edge up, Australia rate decision looms

SYDNEY (Reuters) - Asian shares inched cautiously higher on Tuesday as investors wagered Australia would become the latest country in the region to inject more policy stimulus into its economy.

Liquidity was lacking with markets in Japan, South Korea and Thailand on holiday and little in the way of major economic data on the docket for Tuesday. The pivotal release of the week, U.S. payrolls, is not until Friday.

As a result MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> was up a slim 0.19 percent.

Australia's main index <.AXJO> rose 1.1 percent as investors waited to see if the country's central bank would cut interest rates to a record low of 2.0 percent as many expect.

Markets are pricing in a 60 to 70 percent probability of an easing following the Reserve Bank of Australia's (RBA) monthly policy meeting. A decision will be announced at 0430 GMT.

A cut could dent the Australian dollar, whose stubborn strength is a major argument for easing in the first place. For the moment, the Aussie was holding steady at $0.7840 .

On Wall Street, the Dow <.DJI> had ended Monday up 0.26 percent, while the S&P 500 <.SPX> gained 0.29 percent and the Nasdaq <.IXIC> 0.23 percent.

Berkshire Hathaway Inc rose 1.62 percent, giving the biggest boost to the S&P 500 after the insurance and investment conglomerate's results beat forecasts.

Stirrings of recovery in euro zone economic data had helped European shares higher on Monday, but kept sovereign bonds under selling pressure.

Yields on 10-year German bunds climbed to 0.447 percent and levels last seen before the ECB began buying bonds earlier this year.

A sea change across European markets last week saw the biggest rise in German yields since mid-2013 and the sharpest rally in the euro in 3-1/2 years.

The single currency has since faded from a two-month peak of $1.1290 to stand at $1.1151 on Tuesday $1.1146 , in part because the ECB remains committed to its aggressive easing campaign for at least another year.

The euro also lost a bit of ground against the yen, slipping to 133.96 , from Friday's two-month high of 135.29, while the dollar held at 120.13 yen .

Sterling stayed on the defensive just days before Britons vote in the closest-fought electoral race in recent history.

It bought $1.5116 , not far from a one-week low of $1.5091 set overnight. It has fallen more than 2 percent in the past few sessions.

In commodity markets, Brent oil hit a 2015 high before easing back as Saudi Arabia's plan to halt bombing in Yemen eased tensions over the security of oil Middle East supplies.

Brent crude was quoted 6 cents lower at $66.39 a barrel, after touching a top of $67.10, while U.S. crude eased 5 cents to $58.88.

(Editing by Eric Meijer)

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