MELBOURNE, Jan 18 Reuters -- Asia's share markets were mostly higher on Tuesday even as global investor attention remains fixed on the prospect of U.S. interest rate hikes in the next few months, after two years of unprecedented pandemic-induced policy easing.
The broadest index of Asia-Pacific shares outside Japan was up 0.4%, after the U.S market closed overnight for Martin Luther King Jr. holiday. The index is up 1.1% this month.
Australian shares were up 0.29%, while the blue chip CSI 300 Index in China rose 0.33% in early trading.
Hong Kong's Hang Seng Index was up by 0.61%.
Japan's stock index was trading 0.63% higher ahead of the Bank of Japan's decision to change its policy between 0230 and 0500 GMT.
The Japanese central bank is not expected to change its low rates stance, but it has a tendency to increase its inflation forecasts at https: www.reuters. Ahead of the meeting's outcome, the dollar was trading against the yen at 114.51. It is still a long way from its low last week of 113.49.
A growing number of investors think March will be the beginning of a tighter cycle because of the U.S. Federal Reserve meeting January 25 -- 26.
Rate rises are seen as negative for riskier assets, such as equities.
John Milroy, an adviser at the brokerage Ord Minnett in Sydney, told Reuters that investors' focus remains on the Fed and the pace at which they raise rates.
We think it will be faster than the markets think it's going to be. There is a tight labor market in the U.S. Good for world growth, but adds to the inflation pressures. After the U.S. market closure on Monday, there was a chance of higher U.S. rates in fixed income markets.
In Asian cash market trading on Tuesday, two-year yields went above 1% for the first time since February 2020.
The two year yields track short-term rate expectations and were last up 3.7 basis points bps at 1.0054%.
The five-year yields rose by 3.6 bps to 1.5960%, the highest since January 2020. In early Tokyo trade, the yields of the benchmark 10 years were up about 2 bps to 1.8108%.
The dollar index was up to 95.254, up from 95.254 against a basket of currencies of other major trading partners.
U.S. crude went up 0.49% to $84.23 a barrel. Brent crude was up to $86.53 per barrel.
Gold was slightly lower. 2274 per ounce.