GLOBAL MARKETS-Japanese stocks knocked lower by firmer yen
* Japanese stocks underperform rest of Asia
* Yen hits one-month high vs broadly weaker dollar
* Plenty of hurdles this week, not least Fed meeting
SYDNEY, July 29 (Reuters) - Japanese stocks fell on Monday morning, underperforming other Asian markets as the yen hit a one-month high against a dollar hamstrung by expectations of dovish comments from the U.S. Federal Reserve after a policy review this week.
MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.1 percent, following on from a 1.9 percent rise last week. But Tokyo's Nikkei slid 1.8 percent, extending last week's 3.2 percent decline.
"If the yen rises against the dollar further during the session, selling in futures may drag down the cash market," said Yutaka Miura, a senior technical analyst at Mizuho Securities.
Investors gave the dollar a wide berth as they braced for the Fed to again hammer home the message that it will keep policy loose for the foreseeable future even if it were to decide to scale back stimulus this year.
The greenback dipped to a one-month low against the yen near 97.80 and hit a five-week tough against a basket of major currencies. The euro also slipped against the yen, shedding 0.1 percent to 130.26.
"The Fed is likely to reiterate that while it is considering tapering its monetary stimulus later this year, it is conditional on stronger economic growth and that interest rate hikes are still a long way off," said Shane Oliver, head of investment strategy at AMP Capital.
Oliver said the Fed might even consider adjusting its policy guidance to emphasise there will be no imminent tightening.
"The Fed's assessment of recent mixed data will clearly be watched as a guide to whether the start of tapering will be delayed beyond the September meeting, which was initially the consensus favourite as to when it would begin."
Traders expect markets could be in for a bumpy ride given the flood of earnings reports in major economies and more data out of China that could renew worries about a slowdown in the world's second-biggest economy.
But the Fed, the European Central Bank and Bank of England are all expected to maintain their pledge to keep policy loose at their respective meetings this week, a commitment that should provide a backstop for any earnings or data disappointment.
Worries about a slowdown in China kept commodities under pressure, although the weaker dollar helped limit their losses.
Copper slipped 0.5 percent to a near three-week low of $6,830 a tonne, while U.S. crude eased 0.1 percent to $104.56 a barrel.
Gold took a breather after last week's 3 percent rally. It stood at $1,329 an ounce, not far off a five-week peak of $1,347.69.