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Central banks in driving seat this week

Three central bank meetings will likely top the agenda for Asian markets this week, with particular focus on the U.S. Federal Reserve.

On Wednesday, the Federal Open Market Committee ends its two-day review and traders are bracing for an increasingly hawkish tone from Fed Chair Janet Yellen.

Last week, global equity and currency markets came under pressure on speculation that the central bank could remove language about keeping rates low for a "considerable time". Strategists say if that were to happen, it would start the countdown for the Fed's first rate hike.

Read MoreFed to debate new language on interest rates

"With QE (quantitative easing) due to wind down completely, the Fed is expected to flesh out some detail around the exit strategy and no doubt the debate around the fed funds rate will continue," said Stan Shamu, market strategist at IG, on Friday.

Emerging markets will pay close attention as potential tightening moves could spark another round of capital outflows, similar to 2013's "taper tantrum."

Back in Asia, Malaysia's central bank is expected to hold fire at Thursday's policy meeting after hiking rates in July for the first time since 2011.

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INDRANIL MUKHERJEE | AFP | Getty Images

"With Governor Zeti's recent comments that a sharper-than-expected slowdown would not prompt further rate adjustments, we now expect the Monetary Policy Committee to pause next week, though this is a very close call," said economists at Citi in a note.

"For now, with higher medium-term inflation and potential growth likely raising the neutral policy rate, we see the rate hiking cycle as delayed, not derailed, and we see the next window for a rate hike in November," they said.

Lastly, the Bank of Thailand is also expected to leave rates on hold on Wednesday.

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"Political uncertainty and the recent coup are weighing on growth and tempering inflation pressures. Rates are likely to remain accommodative for the rest of 2014, though any further deterioration in the outlook could prompt more rate cuts," said Moody's Analytics in a report.

On the economic calendar

Apart from central banks, traders will watch economic data releases.

On Monday, India's wholesale price index (WPI) for August will be released. Inflation dropped to a five-month low of 5.19 percent on year in July. Moody's expects prices likely rose 5.3 percent on year in August and sees them bottoming around 5 percent in the coming months.

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On Thursday, Japan's August trade report is due before Tokyo's market open and could disappoint investors. Economists surveyed by MNI expect a 26th straight month of deficit while exports are seen declining 2.6 percent on year, compared with July's 3.9 percent jump.

Finally, New Zealand's second-quarter gross domestic product (GDP) is expected to show a modest 0.5 percent quarterly rise, following the first quarter's 1 percent gain, according to Moody's.

"The reconstruction of Christchurch and increasing residential building are supporting GDP growth. Weaker agricultural‐based manufacturing and softer net exports likely dragged on the headline figure. Firming global demand and solid domestic growth support a favorable outlook in the coming year," the group said.