By Masayuki Kitano and Vidya Ranganathan
SINGAPORE (Reuters) - The U.S. dollar inched up against major currencies but stayed well off highs on Tuesday as investors cautiously traded expectations of whether Federal Reserve Chairman Ben Bernanke will hint at a sooner than expected reduction in bond-buying stimulus.
The U.S. dollar index, which measures the greenback's value against a basket of currencies, edged up 0.1 percent to 83.797, staying below a 3-year high, as suspense built up over whether Bernanke might reveal the timing of any wind-down at his appearance on Wednesday before the Congressional Joint Economic Committee.
A start to cutting the bond-buying programme beginning in the northern summer was hinted at by San Francisco Fed President John Williams last week - putting the issue firmly on the economic committee's agenda.
Another member of the Fed's policy-setting panel, Chicago Fed president Charles Evans, said on Monday the Fed could continue full-speed ahead on its bond-buying program through the summer, but end it abruptly in the autumn if by then it is confident that the improvement in the jobs outlook is sustained.
Early expectations out of Europe were that concerns over the Fed slowing its bond purchases would hurt European shares.
IG Markets predicted Britain's FTSE 100 to open 12 points or 0.2 percent lower; Germany's DAX to fall 15 points or 0.2 percent and France's CAC 40 to drop 0.4 percent.
Currency and stock markets were subdued across Asia, although the Japan's Nikkei index managed to creep up to a fresh 5-1/2-year high.
The Nikkei share average slipped initially as a pause in the yen's weakness spurred profit-taking, but bounced subsequently to a 5-1/2 year intraday high as retail investors scooped up underperforming shares. It was last up 0.1 percent on the day.
"Institutional investors are actually rather quiet today. It seems to be more retail-investor-driven today," said a senior trader at a foreign bank.
On Monday, the dollar index had shed 0.6 percent, retreating from Friday's high of 84.371, its strongest level since July 2010.
MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.2 percent.
Australian shares slipped 0.6 percent on profit-taking. In South Korea, the Korea Composite Stock Price Index eased 0.1 percent to 1,980.27, inching away from a closely-watched resistance level.
"The market atmosphere is pretty good, though it is still facing psychological resistance near 2,000 points," said Kim Young-june, a market analyst at SK Securities.
Against the yen, the dollar edged up 0.2 percent to 102.47 yen but remained below a 4-1/2-year high of 103.32 yen set on Friday.
The yen's recovery in the previous session came after economics minister Akira Amari suggested that the yen's strength had been largely corrected.
On Tuesday, he clarified his remarks, telling reporters he hopes the yen settles at a level that is in line with the country's economic fundamentals and that the foreign exchange market can find a balance between the yen's impact on imports and exports.
Spot gold fell 0.4 percent to $1,388.09. Gold drifted lower on outflows from exchange-traded funds and as the dollar firmed, putting pressure on bullion which has lost nearly a fifth of its value this year.
Brent crude edged up 0.1 percent to $104.86 a barrel.
Global equity markets had mostly pushed higher on Monday, driven up by a flurry of merger and acquisition activity, with MSCI's all-country world equity index touching its highest level since June 2008.
U.S. stocks ended little changed on Monday, but both the U.S. benchmark S&P 500 index and the Dow briefly hit all-time intraday highs.(Additional reporting by Dominic Lau in Tokyo and Jungyoun Park in Seoul; Editing by Eric Meijer)
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