Asian shares inch higher, yen firmer

Bank of Canada Governor Mark Carney said on Tuesday it was critical that no G7 member use monetary policy to target exchange rates.

"All these comments are merely stating the obvious and are not to be taken in the context of whether they are endorsing a weaker yen or not," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo, adding that Carney's comments best describe the thinking of the G7.

"What is being said is that monetary policy should be used to achieve domestic objectives and Japan is undertaking deflationary policies, not manipulating currency rates, and the result of that is a weak yen. What is asked for from Japan is to explain its policy clearly at the G20," Saito said.

The dollar was down 0.2 percent to 93.31 yen after marking its highest level since May 2010 of 94.465 on Monday. The euro eased 0.2 percent to 125.49 yen, moving further away from its highest since April 2010 of 127.71 yen touched last week.

The euro steadied around $1.3450, after rising on comments made Tuesday by European Central Bank President Mario Draghi, who said talk of a currency war was overdone, and that Spain was on the right track toward economic recovery.

Markets were keeping their eye on President Barack Obama's State of the Union address on Tuesday night US timer for any clues on a deal with Republicans to avert automatic spending cuts due to take effect March 1. The tone of the speech will also be scrutinized, with any sign of compromise likely to be warmly received.

US crude was up 0.1 percent to $97.60 a barrel.

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