Asian equity markets stabilized on Tuesday following two straight sessions of sharp losses but caution prevailed ahead of a Federal Reserve meeting.
Emerging market currencies and stocks saw heavy selling abate as the U.S. central bank starts a two-day policy meeting later in the day, chairman Ben Bernanke's final meeting before Janet Yellen takes on the role. Most analysts expect another $10 billion reduction in its monthly bond-purchase program.
"While it makes sense to be cautious about emerging market shares generally, a re-run of the 1997- 98 Asian crisis is unlikely and emerging markets are unlikely to pose a major threat to global economic recovery," wrote Shane Oliver, head of investment strategy and chief economist at AMP Capital, in a note.
(Read more: Will the Fed throw emerging markets a bone?)
Emerging markets steady
Indian shares reversed gains to fall 0.12 percent after the Reserve Bank of India unexpectedly raised its repo rate by 25 basis points to 8 percent. Reuters economists had expected no change in rates.
(Read more: Are rate hikes on the cards for emerging markets?)
In the currency space, the Indonesian rupiah hovered near Monday's two-week low while the , and strengthened. The rebounded nearly 1 percent as markets anticipate a rate hike when the central bank announces the outcome of its emergency policy meeting around 8pm SIN/HK.
Nikkei slips 0.2%
Japan's benchmark index bounced between gains and losses in choppy trade but still managed to move off Monday's two-month low as investors took relief from a weaker currency.
The yen last traded at 102.7 per dollar, well off the previous day's seven-week high of 101.7, boosting blue-chip exporters. Index heavyweight Fast Retailing rose over 1 percent while blue-chip exporters Panasonic and Komatsu also added 1 percent each.
Apple suppliers were dealt a blow after shares of the U.S. tech giant dropped nearly 6 percent in after-hours trade despite upbeat earnings. TDK Corp lost over 5 percent while Daishinku fell 2.5 percent.
(Read more: Nikkei'srout – Is it a signal to buy?)
Shanghai up 0.2%
Mainland shares rebounded following Monday's 1 percent decline after the People's Bank of China (PBOC) injected funds into interbank markets, soothing fears over a new liquidity crunch. On Monday, reports that the PBOC halted bank cash transfers ahead of the upcoming Lunar New Years holiday sparked fears of a nation-wide cash shortage.
Shanxi Coal Industry surged 25 percent in its stock market debut, the biggest mainland listing since the initial public offering market was re-opened last month.
Investors also digested data that showed Chinese industrial profit growth slowed in 2013. Profits rose an annual 6 percent in December, slower than November's 9.7 percent.
In Hong Kong, Lenovo surged as much as 6 percent after research firm IDC ranked the firm fifth-largest in the global smartphone market.
(Read more: Global smartphone makers closing in on Apple)
Sydney 1.3% lower
Australia's benchmark index closed at a one-and-a-half-month low as it played catch-up with the region following Monday's holiday. Sentiment was unable to get a boost even after the National Australia Bank's business confidence survey rose to a two-and-a-half-year high, which sent the Australian dollar closer to $0.88 U.S. cents.
(Read more: Long gold as a crisis hedge: Is it a loser's game?)
Electronics retailer JB HI Fi climbed 5 percent after reporting a 6.8 percent rise in total sales for the last six months of 2013.
Kospi up 0.3%
South Korean shares recovered after closing at a five-month low in the previous session, while the won rose after hitting a four-month low against the dollar on Monday.
— By CNBC.com's Nyshka Chandran. Follow her on Twitter @NyshkaCNBC