By Tom Westbrook

SINGAPORE (Reuters) - Stocks held steady as the dollar edged higher on Wednesday as investors made last-minute portfolio adjustments in the countdown to the year's final salvo of central bank meetings, while news of a potential Nissan-Honda alliance boosted car Raised stocks. .

Asia was flat in the session after indices fell in US trade. European futures and were about 0.2% lower. MSCI's broadest index of Asia-Pacific shares outside Japan was hovering near a two-week low and was up 0.2% by midday.

Later on Wednesday, the dollar hit a one-year high against the Australian dollar and a two-year high against the New Zealand dollar as expectations for the Federal Reserve firmed, signaling a cautious approach to rates in 2025.

Traders are almost certain the Fed will lower the funds rate window by 25 basis points — from its current 4.5-4.75% range — but raise its long-term interest rate projections.

"The market reaction is likely to focus on communications and potential guidance for further cuts," said David Doyle, Macquarie's head of economics.

"We forecast a hawkish shift in the dot plot, consistent with the movement in market expectations since the last update in September."

Then, Fed members' median estimate for rates was 3.4% at the end of next year and a long-term neutral rate of 2.9% — well below current market estimates for a long-term neutral rate of around 3.8%.

Traders are pushing U.S. yields and the dollar accordingly, with the benchmark 10-year yield hitting a one-month high of around 4.4% overnight, before settling at 4.39%.

Asia session was capped by the upcoming Fed meeting and central bank meetings in Japan, Britain, Norway and Sweden on Thursday.

But currency markets reflected broader dollar strength, with the Australian dollar slipping to $0.6313 and the New Zealand dollar to $0.5735. (AUD/)

The euro was under pressure at $1.0502 and the yen was slightly lower at 153.6 per dollar. (FRX/)

Automakers grow

Chinese stocks rose as bonds fell, but the brightest spot in the Asia session was Japan's auto industry.

A record 24% jump in Nissan (OTC: ) shares benefited as investors cheered the prospect of consolidation to cut costs. Shares in Honda (NYSE: ), which has a market cap five times larger than that of troubled Nissan, fell 1.6%.

The companies are in talks to set up a holding company, a move that would allow them to share more resources, according to a person with knowledge of the matter. Both said the merger had not been announced but investors cheered the prospect as margins have come under intense pressure from Chinese electric vehicles.

Mitsubishi Motors ( OTC: ), in which Nissan is the top shareholder, jumped 20% while Mazda rose 4%.

French car manufacturer Reno (EPA:) owns about 36% of Nissan, according to LSEG data.

Sterling was also a standout and firmer as an unexpectedly large rise in British wages dampened expectations of an interest rate cut.

At $1.2700 it is flat for the year and the best performing G10 currency against the dollar, while it is also within range of the post-Brexit vote high on the euro.

The gap between 10-year gilt yields over German bund yields widened on Tuesday to the widest since 1990 and is wider than the gap between U.S. rates and bunds.

Chinese stocks jumped on a Reuters report on China's budget deficit plans and a boost to valuations of state-owned companies from Beijing, while bond yields hit record lows after the central bank urged caution in trade. came back from

Weak economies in Germany and China weighed on oil prices, keeping futures at $73.27 a barrel.

The rise in production has kept a lid on gold, which was trading at $2,644 an ounce. Pulled back from near record highs to trade at $103,633.