* Caution reigns ahead of this week's Jackson Hole Fed conference
* Dollar steady, pressured by fading tightening expectations
* Crude oil futures lifted by indications of tighter supply
TOKYO, Aug 22 (Reuters) - Asian shares edged higher on Tuesday, taking solace from modest gains on Wall Street even as investors remained wary ahead of the annual central banking conference in Jackson Hole later this week.
MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.1 percent.
South Korean shares added 0.5 percent, despite lingering worries about tensions on the Korean peninsula.
Te country's forces began computer-simulated military exercises with the United States on Monday, which Pyongyang has denounced as a "reckless" step toward a nuclear war.
Japan's Nikkei stock index dipped 0.1 percent, while Australian shares added 0.2 percent.
On Wall Street on Monday, the Dow Jones Industrial Average and the S&P 500 marked modest gains, though the Nasdaq Composite edged down slightly.
The dollar index, which tracks the greenback against a basket of six major rivals, was steady on the day at 93.108 .
The euro was flat at $1.1815, while the dollar steadied against its Japanese counterpart after slumping overnight, up 0.1 percent at 119.11.
The dollar has recently faced selling pressure from cool U.S. inflation data as well as concerns that ongoing political turmoil will prevent President Donald Trump from implementing much of his aggressive stimulus and tax reform measures, which in turn could lead the U.S. Federal Reserve from pursuing further policy tightening.
"The dollar was the loser against all of its pairs and I think that's broadly reflective of fading expectations of what the Fed might do," said Bill Northey, chief investment officer at U.S. Bank Private Client Group in Helena, Montana.
"Fed fund futures are showing well below even odds at this point for a move between now and the year-end," he said, adding that while he still expects one more interest rate hike this year, many investors do not.
Expectations of what might emerge from the Fed's annual conference in Jackson Hole, Wyoming are also "relatively tempered," he added.
Fed Chair Janet Yellen is scheduled to speak at the conference, but central bank observers do not expect her to give new guidance on policy.
European Central Bank President Mario Draghi will not deliver any new policy message at Jackson Hole, two sources familiar with the situation said.
Crude oil prices inched higher, lifted by indications that supply is gradually tightening, especially in the United States.
Brent crude futures added 14 cents to $51.80 per barrel, while U.S. crude rose 15 cents to $47.52.
(Reporting by Lisa Twaronite; Editing by Kim Coghill)