Asian shares rose on Tuesday and the dollar held steady as US markets bounced back and the European Central Bank said it was prepared to ease monetary policy further.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.4 per cent at 0240 GMT, with Australia advancing 0.6 per cent and South Korea 0.3 per cent. Japanese markets are shut through Wednesday.

The US dollar edged down after strengthening overnight on signals from some Federal Reserve officials that the central bank is likely to raise interest rates this year.

The greenback slipped 0.1 per cent to 95.802 against a basket of six currencies, after earlier climbing 1 per cent. It retreated 0.2 per cent to 120.36 yen following a 0.45 per cent rise.

US stocks gained overnight as St. Louis Fed President James Bullard and Atlanta Fed President Dennis Lockhart separately made the case for an increase in US interest rates this year, boosting financial shares.

The comments "offer markets an element of certainty in terms of the short term future for interest rates," said Ben Le Brun, markets analyst at trading platform provider optionsXpress in Sydney.

"Volatility remains in check and probably will continue until at least the Federal Open Market Committee meeting in October."

Investors will be seeking more clarity on the Fed's decision with a number of central bank officials, including Lockhart and Chair Janet Yellen, slated to speak this week.

In Europe, ECB Chief Economist Peter Praet reiterated the bank's readiness to modify its trillion-euro bond-buying program should economic turbulence merit action, according to an interview in a Swiss newspaper..

The euro gained 0.1 per cent to $1.12.

Markets also took encouragement from Monday's 1.9 per cent gain in Chinese stocks, Richard Grace, chief currency and rates strategist at Commonwealth Bank of Australia in Sydney, wrote in a note.

Chinese shares extended the gains on Tuesday, with the CSI300 index up 1.1 per cent and the Shanghai Composite climbing 1 per cent.

"However, it won't take much to derail some of the optimism if the September Chinese PMI due tomorrow is on the bearish side, and this may in turn take some pricing of a tightening out of the US rates market," Grace said.

Economists polled by Reuters poll expect the flash China factory PMI to edge up to 47.5 in September from the final 47.3 in August, but that would still leave activity near 6-1/2-year lows and point to a seventh straight monthly contraction in the sector.

Investors are also awaiting the euro zone's flash manufacturing activity reading on Wednesday, which is expected to come in slightly stable to soft in September.

Fears of a sharper slowdown in China sparked a heavy selloff in global markets over the past month and were cited by the Fed as one of the main factors that convinced it to keep interest rates on hold last week.

China's slowdown is already increasingly weighing on the economies of its Asian neighbours.

Taiwan's export orders -- seen as an indicator of the strength of global demand for hi-tech products -- contracted for a fifth month in August as demand from China and other key markets continued to deteriorate, data showed on Monday.

The bigger-than-expected order decline does not bode well for trade-reliant Asian economies hoping for a recovery in exports heading into the year-end shopping season and raises the chances that Taiwan's central bank will cut interest rates later this week.

Oil prices, which surged overnight on hopes that declining stockpiles and less drilling could reduce future output, surrendered some of the gains in early Asian trade as traders took profit.

US crude futures slipped 0.9 per cent to $46.27 per barrel after jumping 4 per cent in the previous session. Brent futures were 0.7 per cent lower at $48.58. – Reuters