Asian shares followed Wall Street higher on Wednesday, albeit in thin volume, and short-term US bond yields held near 4 1/2-year highs as investors braced for the possibility of the first interest rate hike in the United States in almost a decade.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.3 per cent, while Japan's Nikkei gained 1.1 per cent.

China shares rose 0.6 per cent after sliding 6 per cent early in the week on concerns about its slowing economy.

Markets remain mixed on the likelihood of a rate increase by the Fed at its two-day meeting starting later in the day, and US economic data published on Tuesday did little to either back, or douse, expectations of one.

"Sentiment is shifting on a 5-cent piece right now," said Ben Le Brun, markets analyst at trading platform provider optionsXpress in Sydney.

"Although futures markets are pricing in a less than 30 per cent chance of a rate hike on Thursday, the US dollar continues to strengthen, meaning that traders might be having an each-way bet on the outcome."

US shares rose 1 per cent overnight, in part helped by data showing healthy growth in consumer spending, although retail sales for August were slightly below market expectations.

Manufacturing remained soft, pressured by the impact of the strong dollar on exporters, slack economies oversees and lower oil prices.

US Treasuries yields jumped on Tuesday, with the policy-sensitive two-year yield rising about 8 basis points to 0.815 per cent, its highest level since April 2011.

It last traded at 0.7863 per cent.

The 10-year US notes' yield stood at 2.2634 per cent , having risen to a 1-1/2-month high of 2.294 per cent on Tuesday.

"Those moves do not seem to be caused by any leaks on the Fed's meeting," Chotaro Morita, chief fixed income strategist at SMBC Nikko Securities, said in a report.

"They are probably triggered by nervousness among those who are taking positions" ahead of the Fed's policy announcement.

The dollar index extended its rebound from Monday's three-week low of 95.125 to stand at 95.513. But it is essentially staying within its well-worn range of the last few weeks.

The euro traded up 0.2 per cent at $1.1284 while the dollar slipped 0.1 per cent to 120.23 yen.

Emerging market currencies remained under pressure near multi-year lows on worries of capital outflows as US yields rise and by concerns over China's slowdown.

Oil prices extended gains made on Tuesday, driven by rallying stocks, higher gasoline prices and on a report showing strong stockpile draw compared with expectations for a build.

US crude futures rose 0.8 per cent to $44.94 per barrel while Brent futures rose 0.2 per cent to $47.85. – Reuters