The euro, Asian shares and commodities held steady on Wednesday as investors awaited U.S. Federal Reserve Chairman Ben Bernanke's speech to international central bankers gathering in Jackson Hole on Friday and a European Central Bank meeting next week.
Eyes are locked on both events for any signs of further monetary easing to come from Europe and the United States.
The euro traded at $1.2557 against the U.S. dollar, hovering near a seven-week high of $1.2590 hit last week, and touched an eight-week high against the Australian dollar at A$1.2123 on optimism that Europe will take positive steps to tackle its debt crisis.
Spot gold traded at $1,667.31 an ounce, near a 4-1/2 month high of $1,676.45 hit earlier in the week, while copper inched up 0.1 percent at $7,615 a tonne.
MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> were little changed, after hitting a three-week low on Tuesday, and the Nikkei stock average (.N225) gained 0.3 percent after closing at its lowest level in two weeks. (.T)
Bernanke's speech on Friday at an annual Jackson Hole, Wyoming, meeting of central bankers and economists, which precedes the Fed's September 12-13 policy meeting. He has used the event in the previous two years to signal the Fed's easy policy intentions.
But investors have become less certain of getting any policy hint from Bernanke this week or strong monetary stimulus from the Fed's meeting next month, as data released over the past month has generally pointed to a modest U.S. recovery.
A key jobs data due early in September could still revive expectations for a powerful easing if numbers were weak.
"It appears that markets are nearly done with adjusting their positions before key events," and some may be shifting their focus beyond Jackson Hole to U.S. economic data and the September 6 ECB policy meeting, said Takao Hattori, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.
Fed policymakers have not agreed at this point to a new round of stimulus, Dallas Federal Reserve Bank President Richard Fisher, a non-voting member on the Fed this year, told Reuters on Tuesday, saying "Nothing is predestined.
"We don't believe that Bernanke will pre-commit the Fed at the JH conference (especially given the important upcoming Payrolls release on 7 September)," Societe Generale said in a research note.
"In fact, Bernanke may use the opportunity to highlight the limitations of what central banks can do. Thus, there is a risk that markets (especially the equity markets) will react with disappointment," it added.
Optimism that the Fed would soon undertake major quantitative easing action through a third round of bond buying, nicknamed QE3, had fuelled market rallies over the past month, but the growing doubts were evident as the CBOE Volatility index (.VIX) inched up to close at a four-week high of 16.49 on Tuesday.
The VIX measures expected volatility in the Standard & Poor's 500 index (.SPX) over the next 30 days, and its climb typically accompanies a rise in risk aversion.
MORE HOPEFUL ON EUROPE
In contrast, hopes remained fairly firm for chances that the European Central Bank will soon unveil measures to ease borrowing stress in struggling countries such as Spain and Italy.
ECB President Mario Draghi cancelled his attendance of Jackson Hole due to a heavy workload as he gears up for the bank's critical policy-setting meeting on September 6.
"Markets are expecting the ECB to provide some kind of details about the bond buying scheme, and (Draghi skipping Jackson Hole) may imply he is facing some difficulties putting together the plan," Hattori said.
Failing to live up to market expectations could undermine the euro as concerns over Spain's fiscal woes strengthened.
Spain's most economically important region, Catalonia, said it needed a major rescue from Madrid, refueling fears the country may soon have to ask for a European rescue package to reduce its debt costs as the austerity measures, aimed at slashing the public deficit, push its economy deeper into recession.
Oil prices fell, with U.S. crude down 0.4 percent at $95.94 a barrel and Brent down 0.3 percent at $112.20. (O/R)
Oil rose on Tuesday as Hurricane Isaac approached the U.S. Gulf Coast, forcing companies in the region to close down oil production platforms and refineries.
Late on Tuesday, Group of Seven finance ministers issued a statement urging oil-producing countries to raise output to ensure the market is well supplied, while warning that Western nations were ready to tap strategic oil reserves to offset rising prices that could hurt global growth.
Asian credit markets were also lackluster, with the spread on the iTraxx Asia ex-Japan investment-grade index little changed.
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