SINGAPORE. Feb k Most Asian stock markets fell today as investors grew cautious ahead of a US Federal Reserve meeting which is widely expected to raise interest rates, says Reuter.

Ignoring gains on Wall Street. Tokyo's benchmark Nikkei average of 225 leading shares closed down 116.32 points or 0.60 per cent at 19.423.38

Hong Kong's Hang Seng Index closed 0.78 per cent higher at 15.653.86 but it was unable to recoup Monday's steep fall.

There is concern about the course of US interest rates. But domestic factors... are becoming a pretty powerful factor these days from Tokyo." said Hiroichi Nishi, deputy general manager at Nikko Securities.

Japan's key market gauge fell by as much as 1.4 per cent at one point due to concern that the Fed might opt for a steep rate hike at its key policy meeting beginning later on Tuesday.

But traders said hopes of increased buying by new investment trusts had helped the market pare some losses.

The US central bank is widely expected to raise rates by 25 basis points at the conclusion of Its two-day meeting, with an outside chance of a more aggressive 50-basis-point

hike.

Hong Kong stocks surged in early trade after the Dow Jones industrial average rose 1.88 per cent overnight. But traders said caution over the Fed's move and ahead of the weekend Chinese New Year holidays soon brought the market down.

"On the eve of the US interest rate announcement, the market is only up 80 odd points as traders position themselves for tomorrow." said David Williamson, sales director at China Everbright Securities.

The dollar slipped against the euro and the Japanese yen in Tokyo in quiet trade as Interest rate nervousness also drove investors and traders to the sidelines in the money markets.

But these concerns failed to alter the recent pattern of broad-based dollar strength and euro weakness. By 0850 GMT. the dollar was at 107.28/38 versus 107.36 yen in late New York.

In the Australian market. Wall Street s rally failed to boost stocks. The benchmark All Ordinaries Index fell 11.5 points to 3.084.5 on domestic interest rate concerns.

investors fear monetary policy could be tightened more than expected when the Reserve Bank of Australia (RBA) meets

on Tuesday. The bank is due to make an announcement at 2230 GMT.

The market is still not sure about the size of the rate rise so the RBA's move will clear the air." said Burrell & Co broker Richard Herring.

Any rise in Australia's official cash rate will come on Wednesday morning at the earliest. The outcome of the US Fed meeting will be announced early on Thursday Australian time.

Taiwan shares bucked the trend of losses, taking heart from bullish retail sentiment and gains in the US markets.

The benchmark TAIEX index closed up 1.14 per cent at 9.856.39 points, its highest level since August 1997.

"Investors are getting more and more bullish." said George Hou, vice president of Jardine Fleming in Taiwan. "We have not launched any new funds this year but the amount of cash we feel coming In is as if we were raising money for a fund."

South Korea's benchmark index fell as institutional investors sold core blue chips. The Korea Composite Stock Price index ended down. 1.60 per cent at 928.75 points. Singapore's Strait's Times Index had edged 3.6 points higher to 2.233.88 in late trade.