Most of the markets were lower in quiet trade although the selling was more marked in Jakarta where investors were spooked by the continuing fall of the rupiah and weekend rioting. The Bombay market staged a remarkable turnaround after losing more than four per cent in early trade because of the US interest rate issue and worries about drought.

Buying by traders and local institutions in particular saw the key index bounce back in afternoon trade. Share prices in Tokyo closed 0.3 per cent lower as investors grew wary of the New York market ahead of the US Federal Reserve meeting, brokers said. "Concerned about risks stemming from the outcome of the Fed meeting tomorrow, investors shunned high-priced issues that may be affected and bought medium- and low-priced issues," said Nikko Securities analyst Kazue Mayuzumi. The key Nikkei-225 index lost 44.17 points to end at 17,313.69. The Topix benchmark of all first-section issues was down 3.14 points at 1,627.35.

"Investors are unwilling to launch major buying as the Fed meeting nears," said Kazunori Jinnai of Daiwa Securities SB Capital Markets. Investors expect Federal Reserve policy makers to raise US interest rates by half a percentage point when they meet on Tuesday to cool the US economy, traders said.

"If the New York market suffers greatly from the rate hike, it would also drag the index down here," Jinnai predicted. But Japan's ongoing corporate results season would limit any falls, he added. Singapore shares closed slightly lower as investors stayed on the sidelines and regional markets awaited the announcement on US interest rates, dealers said. The Straits Times Index ended 15.19 points or 0.7 per cent down at 2,011.46. There were widespread expectations that the Federal Open Market Committee (FOMC) will raise the key overnight fed funds target rate by 50 basis points, further bolstering the US dollar against major currencies as well as Asian units.

"Investors are very cautious ahead of the FOMC meeting," said a dealer with a local brokerage. "Some people are thinking that the expected rate hike tomorrow will be the start of aggressive rate adjustments in the coming months. It's difficult to predict where the market is heading," the dealer added.

-- AFP