Asia stocks gain as Wall Street rises before Fed

Asian stocks gained early on Wednesday, with sentiment lifting as Wall Street rose before a likely hike in US interest rates, while the dollar held to large gains made as Treasury yields picked up.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.7 percent.

Australian shares climbed 1.5 percent and Japan's Nikkei gained 1.9 percent.

On Wall Street Tuesday, the Dow added 0.9 percent and the S&P 500 advanced 1.1 percent. Bank stocks, which will likely benefit from higher rates, were among the market leaders with a 2.4 percent advance on the S&P financial sector index.

The Federal Reserve is expected to announce a hike in interest rates when its two-day policy setting meeting ends later in the day. It would be the first US rate hike in nearly a decade, signaling the beginning of an end to an expansionary monetary policy that has supplied a tidal wave of liquidity to risk asset markets globally.

With a hike seen as a mostly done deal after more than a year of anticipation, investor focus is fixed on how the Fed might opt to pace its tightening cycle next year. The central bank has hinted that it intends to hike rates gradually.

"(Fed chair) Yellen should stress data-dependence in following up with further tightening next year and will surely not drop any heavy hints about the timing of the next move. No one can be confident how the dollar will emerge from all this but volatility seems assured," wrote Sean Callow, a senior strategist at Westpac.

The dollar index last stood at 98.183, having gained 0.6 percent on Tuesday.

The dollar was steady at 121.67 yen, pulling further away from a six-week trough of 120.35 struck Monday. The euro traded near USD 1.0900 after recoiling from a seven-week peak of USD 1.1060.

Supporting the greenback, Treasury yields rose overnight as gains on Wall Street reduced the appeal of safe-haven bonds and stable US consumer prices data supported the case for a Fed rate hike.

In commodities, crude oil dipped after gaining for two successive days. US crude CLc1 was down 1.2 percent at USD 36.89 a barrel. Concerns of global oversupply had sent crude to a seven-year low of USD 34.53 earlier this week.