Asian shares off highs, Fed's stance underpins markets TOKYO (Reuters) - Asian shares took a breather from recent rallies on Thursday though sentiment was underpinned by the U.S. Federal Reserve's pledge to retain its stimulus policy and on signs of stabilization in the euro zone. Positive economic reports from Asia failed to lift markets as investors continued to assess regional earnings results and ahead of key data such as China's official manufacturing PMI and U.S. monthly nonfarm payrolls on Friday. The MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.4 percent after rising 1.3 percent over the past two sessions to nearly an 18-month high. The index was set for a monthly gain of about 2.4 percent. Australian shares .AXJO eased 0.4 percent, taking a breather from their 10-day winning streak, the longest in more than nine years, which hoisted local shares to 21-month highs. Certainly 2013 has started with an air of optimism. U.S. politicians show some willingness to deal with problems, no fresh issues have emerged in Europe and the Chinese economy is exhibiting firmer growth. Volatility has receded with investors keen to put cash to work in other asset classes," said Craig James, a strategist at CommSec in Sydney. Southeast Asian stock markets were generally softer but remained near their highs. The Philippines .PSI hit a record high for the third day running on Wednesday and Thailand's .SETI market surged to a more than 18-year high on Wednesday. The Federal Reserve on Wednesday kept in place its monthly $85 billion bond-buying stimulus plan, arguing the support was needed to lower unemployment. Underscoring the Fed's cautious view, data on Wednesday showed the U.S. economy unexpectedly contracted in the fourth quarter. Still, a lot of that weakness came from a plunge in defense spending, suggesting the underlying fundamentals were not as bad as the headline figures indicated. In Asia, the data on Thursday provided cause for optimism. Taiwan raised its economic growth forecast for 2013, after the fourth quarter expanded faster than expected and posted its best growth in five quarters on improved demand for the island's electronics exports and stronger consumption. "Taiwan's economic growth will be better this year as Europe's outlook is becoming positive, it will have a bigger rebound as an export-oriented economy," said Scott Chen, economist at Sinopac Commercial Bank in Taipei. The Philippines said on Thursday its economy grew 1.5 percent in the December quarter from the previous three months, better than market forecasts. Japan's benchmark Nikkei stock average .N225 shed 0.6 percent after soaring 2.3 percent to a 33-month high the day before, taking its cue from the yen firming from fresh lows hit on Wednesday. .T "It's too early to take profit," a trader at a foreign bank said. People should look for names which are still undervalued, still haven't moved (in line with the rally in the Nikkei) and could outperform. Prime Minister Shinzo Abe's approach of revitalizing Japan's economy through an aggressive mix of fiscal steps and monetary easing is expected to keep the yen on a weakening path. The dollar eased 0.3 percent to 90.81 yen after reaching 91.41 yen on Wednesday, its highest since June 2010. The euro also fell 0.3 percent to 123.24 yen, after hitting 123.87 on Wednesday, its peak since May 2010. Japan's December factory output rose at the fastest pace in a year and a half and firms expect further gains, raising hopes that stabilizing global demand and exports will help pull the economy from its slump. The euro held near a 14-month high of $1.3588 scaled on Wednesday. Reports from the euro zone on Wednesday underscored views that the debt crisis-hit region may be overcoming the worst, with economic sentiment improving more than expected across all sectors in January and a gauge for the phase of the business cycle also rising this month. The rise in the EUR is a sign of the success of the European Central Bank on the credit front, which matters far more than a short term rise in EUR/USD. Money is flowing into Europe and from North back to the South or from ECB funding to money market funding," Sebastien Galy, strategist at Societe Generale, said in a note to clients. Spot gold hovered near its one-week high of $1,683.39 an ounce reached on Wednesday. U.S. crude futures steadied around $97.93 a barrel and Brent crude was up 0.2 percent to $115.09. <O/R> Additional reporting by Dominic Lau in Tokyo and Miranda Maxwell in Melbourne; Editing by Jacqueline Wong and Shri Navaratnam