TOKYO, Dec 29 (Reuters) - Japan's Nikkei average is expected to come under downward pressure on Wednesday due to a firmer yen, but solid bargain-hunting is likely to emerge on price dips as underlying sentiment towards Tokyo stocks remains strong.
Investors will be hesitant about chasing Japanese shares on rallies after the yen rose to a 6-1/2-week high against the dollar the previous day, analysts said.
"The market is cautious after the yen rose to the 81 level (against the dollar). It'll be tough to buy Japanese stocks if the yen firms to that level again," said Kazuhiro Takahashi, general manager at Daiwa Capital Markets.
"Falls in the Nikkei will be limited as there is plenty of bargain-hunting demand. Foreign investors are expected to return from holidays, so we want to see how they behave when the Nikkei actually starts to fall."
Nikkei futures traded in Chicago closed at 10,310, slightly below the Osaka close of 10,320.
The Nikkei is expected to move in a range of 10,200 to 10,350 on Wednesday, after it slipped 0.6 percent the previous day.
The dollar was at 82.43 yen in early Asian trade after falling as low as 81.81 yen, its lowest since November, on Tuesday.
The Nikkei is expected to find support at its 25-day moving average, currently around 10,203.
Still, investors may be keen to push the Nikkei above last year's close of 10,546.44 by the final trading day on Thursday, analysts said.
Upward momentum could pick up if the Nikkei breaks through resistance at 10,420.74, where December futures and options contracts settled earlier this month, they said. ----------------------MARKET SNAPSHOT @ 2251 GMT ------------
LAST PCT CHG NET CHG S&P 500 1258.51 0.08% 0.970 USD/JPY 82.43 0.01% 0.010 10-YR US TSY YLD 3.4913 -- 0.164 SPOT GOLD 1404.45 -0.07% -1.050 US CRUDE 91.28 -0.23% 0.000 DOW JONES 11575.54 0.18% 20.51 ------------------------------------------------------------- > S&P, Dow rise on energy, keeping rally alive > Dollar hits record low vs franc, recovers vs euro > Yields jump as dealers prepare for 7 yr auction > Gold jumps to 2-week high $1,400 in year-end binge > Oil rises to over $91 despite dollar strength
STOCKS TO WATCH:
-- Hitachi Ltd
Hitachi and partner General Electric may struggle to hit a long-term orders target for nuclear power plants due to signs of waning demand in the United States, the president of Hitachi said.
-- Nippon Telegraph and Telephone Corp
NTT plans to cut prices by nearly 40 percent on its Flet's fibre-optic broadband service next year, the Nikkei business daily said.
-- Dai-ichi Life Insurance Co
Dai-ichi Life will take full control of Tower Australia Group Ltd for $1.2 billion in cash, the latest overseas acquisition by Japanese insurers keen to move beyond a stagnant home market. (Reporting by Chikafumi Hodo; Editing by Michael Watson)