Asian equities traded unevenly Tuesday as investors braced for the Federal Reserve's policy decision. The Nikkei 225 fell sharply, dragged down by a surging yen that pressures Japanese exporters. Markets elsewhere showed modest gains, reflecting cautious positioning ahead of the Fed's rate outlook.

The yen's strength, which has pushed the USD/JPY pair below 150, directly hurt Japan's export-heavy index. This currency move is a key market driver, as a stronger yen erodes overseas earnings for major Japanese manufacturers. The Fed's tone on inflation and future rate cuts will dictate the next leg for both the dollar and regional stocks.

Traders are parsing every word from Fed Chair Jerome Powell for clues on the pace of monetary easing. A more hawkish-than-expected stance could bolster the dollar further, adding to pressure on the Nikkei. Conversely, a dovish tilt might lift regional benchmarks but could weaken the yen, offering relief to Japanese firms.