Tuesday saw a little increase in most Asian equities due to expectations of a Federal Reserve interest rate decrease, but Japanese markets suffered from a stronger yen ahead of a Bank of Japan meeting.

After a volatile overnight session on Wall Street, when losses in technology companies pulled the NASDAQ down, regional markets followed conflicting signals. However, when some money moved into economically sensitive sectors due to speculations on lower interest rates, the Dow Jones set a new high.

In Asian trading, U.S. stock index futures remained unchanged. Because of South Korea's and China's market vacations, regional trade volumes were low.

Amidst increasing speculation that the Fed would lower interest rates by 50 basis points at the end of its two-day meeting on Wednesday, Asian equities saw an increase.

According to CME Fedwatch, traders were pricing in a 68% likelihood of a 50 bps drop and a 32% chance of a 25 bps cut.

The ASX 200 in Australia gained 0.3%, and the Hang Seng index in Hong Kong gained 0.9%, recovering after sharp losses sustained in the previous day following a slew of unfavourable economic data from China.

The potential for a fresh trade war with the West also damaged sentiment towards China.

The Fed is largely expected to begin off an easing cycle from Wednesday’s meeting, with lower rates offering a more favourable picture for stock markets. The market price for rate reductions this year is at least 100 basis points.

Reduced interest rates increase the liquidity available for riskier asset investments, which often ignite stock market movements.

Local markets in Japan were impacted by the yen's strength, which on Monday reached its highest level in more than a year. A rising yen put further strain on industries focused on exports.

Expectations that the BOJ will sound hawkish during its meeting later this week, even if the central bank is still likely to hold interest rates steady, supported the value of the Japanese yen.

However, a few BOJ members hinted that an increase in Japanese interest rates is likely in the near future, particularly given the country's rising inflation. This Friday is when the Japanese consumer inflation data is due.

Japan's markets were also under pressure from losses in technology companies, as leading chipmakers experienced a decline in line with their Wall Street counterparts.

(Sources: investing.com, reuters.com)