Asia in consolidation mood before Yellen

Reuters - Asian markets settled in for a session of consolidation on Tuesday as investors waited to hear the new head of the U.S. Federal Reserve's outlook for the economy and policy, with most expecting a reaffirmation of the status quo.

Fed Chair Janet Yellen gives her first testimony before the House Financial Services Committee at 1500 GMT, and will likely face questions on the state of the labour market and the future pace of tapering.

In the meantime, market moves were marginal with the dollar and stocks a shade softer, and activity extra light due to a holiday in Japan. MSCI's broadest index of Asia-Pacific shares outside Japan was just a fraction lower, as was Australia's main index.

On Wall Street, the Dow eked out a 0.05 percent gain, while the S&P 500 added 0.16 percent. Share values have been supported by solid earnings. With about 69 percent of the S&P 500 having reported, 68 percent have topped profit expectations, above the long-term average.

MSCI's all-country equity index rose 0.26 percent on Monday, while the pan-European FTSEurofirst 300 closed up 0.08 percent.

Currencies were confined to well-worn ranges, though the dollar was softer overall. The dollar index, which measures the greenback against six major currencies, last traded down 0.06 percent at 80.643.

The dollar also faded back to 102.24 yen from a top at 102.65, while the euro inched up to $1.3645.

Yellen appears before the Republican-controlled House of Representatives Financial Services Committee on Tuesday and the Democrat-controlled Senate Banking Committee on Thursday.

Analysts generally assume Yellen will stick with the script and reiterate that the Fed will continue to scale back its asset buying, as long as the economy improves as expected.

"The testimony is likely to be more theatre than economics," said Marshall Gittler, head of global FX strategy at online trader IronFx Global.

"Yellen will probably try to remain polite and give upbeat, optimistic answers that will play well on TV. In that respect her testimony may present a favourable picture of the U.S. economy that could boost the dollar."

One argument for staying the course on tapering is that bond investors have learned to live with the idea without freaking out, as they did a couple of times last year.

Yields on U.S. 10-year Treasury paper have settled back at 2.67 percent, well below recent highs of 3.04 percent, and lessened a threat to the housing market.

Investors, too, have accepted that tapering is not the same as tightening and have pushed out the timing of the first actual hike in the Fed funds rate. A move is not fully priced in until late 2015 , a view Yellen is likely to endorse.

The prospect of low rates for longer has been supportive of gold, which edged up to $1,273.74 and threatened the January high at $1,278.01.

In oil markets, Brent crude was pressured by sinking heating oil prices as the market looked toward the end of a long and frigid winter, and as supplies increased from Libya and the North Sea. Brent fell back $1.15 to $108.42 a barrel and off a five-week high above $109.

U.S. crude fared better and held steady at $100.06, after rising to its highest this year at $100.55.