* Asian shares see modest gains, led by Korea; Japan closed
* Dollar runs out of steam, mkts await Fed meeting
* NZ dollar surges to 13-mth high on rising dairy prices
By Susan Fenton
HONG KONG, Sept 22 (Reuters) - Asian shares edged higher on Tuesday, helped by gains in South Korean technology shares, while the New Zealand dollar surged to a 13-month high on signs of a recovery in prices for the country's key dairy exports.
European stock futures were up 0.5 percent while U.S. equity futures were 0.2 percent higher.
The U.S. dollar ran out of steam, pulling back to around 91.70 yen after reaching 92.53 yen on Monday. However, analysts do not expect the U.S. currency to slip much ahead of a U.S. Federal Reserve monetary meeting on Tuesday and Wednesday, and a G20 summit this week.
"Persistent consolidation seems to have set in ahead of the G20 meeting," said Clifford Bennett, chief economist at Kinetic Securities in Australia. "Especially in the currency market there is increasing fear of some 'strong dollar' statements and/or political rhetoric about the euro being too strong."
Volumes were capped as Japanese financial markets are closed until Thursday for public holidays. Malaysian and Indonesian markets were also closed for public holidays.
In Australia, shares were little changed, dampened by an overnight drop in commodities prices although gold bounced back as the dollar retreated and oil recovered to $70 a barrel.
South Korean shares climbed 1.4 percent, helped by gains in tech stocks after Merrill Lynch upgraded Hynix Semiconductor, the world's No. 2 memory chip maker.
Shares in Hynix gained 2.8 percent and Samsung Electronics, the world's biggest maker of memory chips, jumped 3.4 percent although the company said it was cautious on the outlook for the sector.
Treasury bond futures fell after the Bank of Korea said it was ready to use monetary policy to help calm rising property prices.
FED WATCH
The MSCI index of Asia Pacific stocks traded outside Japan edged up 0.7 percent and has nearly doubled since early March when markets began pricing in an economic upturn.
In the past two months, a slowing equity rally together with abundant liquidity and easing inflation means equity and bond markets have both gained ground. But Adrian Foster, head of Asia-Pacific financial markets at Rabobank, says both markets could retreat in the next few months.
"We think equities have priced in a reasonable economic recovery," Foster said. "Over the next few months, bonds could back off a bit on improving economic data and we'll see higher yields."
The Asian Development Bank raised its growth forecasts for 'developing Asia' to 3.9 percent for 2009, from 3.4 percent, and lifted its 2010 forecast to 6.4 percent from 6 percent.
Financial markets will be watching the U.S. Federal Reserve's two-day monetary policy meeting for any comments indicating the Fed might wind back its super-accommodative policy stance given improving U.S. economic data. That would be a boost for the dollar if it does, analysts said.
The New Zealand dollar surged to a 13-month high above $0.7159, after the country's Fonterra group, the world's largest dairy exporter, raised its estimated payout to farmer shareholders for the 2009/10 season by 12 percent, citing signs of a recovery in dairy prices.
Fonterra generates about 7 percent of New Zealand gross domestic product.
The kiwi, which has rallied more than 40 percent from a six-year low plumbed in early March, was also supported by current account data that showed New Zealand's second quarter deficit at its lowest level in nearly five years.
Commodities prices steadied after the Reuters-Jefferies CRB index of commodities tumbled 2.2 percent in New York trade, its largest percentage drop in five weeks.
China is expected to remain a fervent buyer. Its sovereign wealth fund China Investment Corp has bought a 14.5 percent stake in Singapore-listed global commodities trader Noble Group, according to sources, giving China greater exposure to global commodities and trading expertise.
Shares in Noble, which has interests from Brazilian sugar to Australian coal, remained suspended.
China shares were weak with the Shanghai share index dropping 1.6 percent as fears persisted that upcoming IPOs will create excess supply of shares. (Additional reporting by Anirban Nag in Sydney; Editing by Jeremy Laurence)