World shares hovered just below all-time highs on Tuesday as investors drew encouragement from a rally in Chinese markets and beaten-down Russian stocks enjoyed some relief after three days of heavy selling.
Investors remained cautious, however, given geopolitical jitters and a torrent of U.S. economic news due to come this week, including a Federal Reserve meeting and GDP data on Wednesday and non-farm payrolls figures on Friday.
The dollar shuffled higher on bets it will all add up to the Fed hiking U.S. interest rates for the first time since the financial crisis early next year. European shares and euro zone bonds also made small gains in early deals after another jump in Chinese shares had lifted Asian stocks to a new three-year high.
Russian stocks steadied too after investors dumped them in recent days in anticipation of broader economic sanctions to be imposed by the European Union on Moscow this week.
Diplomats will hold more talks on Tuesday to try to forge an agreement on the final shape of the measures which are set to target capital markets, defense, and sensitive technologies key to some of Russia's major industries.
Fears this may not be the last wave of sanctions for a Russian economy already facing the risk of recession pushed the rouble and some of Russia's benchmark bonds lower, while safe-haven German government bonds hit new historic highs.
Japan became the latest country to confirm it was putting the squeeze on Moscow, saying it would "freeze assets of individuals and groups who are judged to be directly involved in Crimean annexation and the instability in the east of Ukraine".
In a move that helped nudge the yen lower, Russia hit back on Tuesday saying the measures were "unfriendly" and would harm relations between the two countries.
FED FOCUS
Action was otherwise lacking among the major currencies. The dollar held close to a six-month peak against a basket of its peers, having gone virtually nowhere as investors kept to the sidelines ahead of a policy review by the Federal Reserve.
The New Zealand dollar was the main loser in the developed world, weighed down by further signs of weakness in the country's influential dairy sector.[FRX/]
The Fed is sure to cut its monthly bond-buying program by another $10 billion as it looks to wind up the scheme later in the year, but the focus for markets is on any clues to the timing of its first interest rate hike.
With other key data such as U.S. gross domestic product and the closely watched non-farm payrolls report still to come, investors were content to sit on their hands.
The euro was pinned near an eight-month trough of $1.3421 set on Friday. It traded at $1.3432, having shuffled between $1.3430 and $1.3440.
Against the yen, the dollar edged up to 102, while the common currency barely budged at 136.93.
In commodities, gold was idling at $1,304.79 after a very quiet 24 hours saw it hold to an $8 range.
Oil prices dipped as signs of excess supplies of North Sea and West African crude and weak demand in Europe and Asia offset fears of escalating tensions in Ukraine and the Middle East.
September Brent lost 4 cents to $107.53 a barrel, while U.S. crude futures eased 26 cents to $101.41.
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