Asian stocks steadied near 11-month highs on Wednesday, as investors paused for breath before more earnings reports, but rising dairy prices pushed the New Zealand dollar to a 10-month peak.

Sentiment in Seoul got a slight early lift after former U.S. President Bill Clinton secured the release of two U.S. journalists jailed by North Korea. But the market later shrugged off the news as analysts said it would not ease tension between South Korea and its neighbor.

The market is confined in a very tight range after such a big rally, though positive news like U.S. housing data continues to come out, said Soichiro Monji, chief strategist at Daiwa SB Investments.

The MSCI index of Asia-Pacific stocks outside Japan edged up 0.3 percent by midmorning, slowing down after rallying 40 percent since late April.

Japan's Nikkei index <.N225> slipped 0.08 percent and Toyota Motor Corp <7203.T> faced light profit taking, falling 1 percent, after the world's biggest automaker cut its annual loss forecast but announced a third straight quarterly loss on Tuesday. Camera maker Nikon <7731.T> was down 1.2 percent ahead of quarterly results later in the day.

Investors were also reluctant to push the Korean market much higher after gains for 15 straight sessions and the benchmark KOSPI index <.KS11> was up just 0.3 percent by midmorning.

Surprisingly strong U.S. housing data pushed the Dow Jones index <.DJI> up 0.4 percent on Tuesday although a sharp drop in U.S. personal income suggested economic recovery would be slow.

POLICY SHIFT

U.S. Treasuries fell on the housing report and put pressure on South Korean treasury bond futures, with Korean September futures dipping 2 ticks in early trade. Japanese government bonds bounced back though as Japanese stocks retreated and 10-year September JGB futures edged slightly higher.

U.S. economic data supported improving risk appetite and kept the U.S. dollar close to 2009 lows against the euro.

The New Zealand dollar briefly touched a 10-month high at $0.6751 after New Zealand's Fonterra Cooperative Group, the world's top dairy exporter, reported a strong rebound in international dairy prices at its latest auction.

The Australian dollar came within sight of a 10-month high on news of a smaller-than-expected trade deficit in June and after the Reserve Bank of Australia shifted to a neutral stance from an easing bias at its review on Tuesday.

Firm commodity prices also supported the Australian currency. Shanghai copper prices rose more than 1 percent after London copper prices hit 10-month highs on hopes the U.S. housing report signaled improving economic fundamentals.

Economic recovery hopes meanwhile boosted Hong Kong's Hang Seng Index <.HSI>, which was up 1 percent and shares in Cathay Pacific <0293.HK>, which were up 2.5 percent ahead of interim results later on Wednesday.

Previously one of the world's most profitable airlines, the carrier's fortunes took a turn for the worse last year amid volatile oil prices and the global economic downturn

Oil prices edged higher again on Wednesday after Tuesday's retreat, with U.S. crude futures heading toward $72 a barrel after a surprise drawdown in U.S. crude inventories last week.

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