* Japan's Nikkei bucks regional downtrend on weaker yen, pension fund shift
* Downbeat China manufacturing report saps investors' risk appetite
* Euro rises vs yen but well below 4-year peak touched on Wednesday
* BOJ holds policy steady as expected
By Lisa Twaronite
TOKYO, Nov 21 (Reuters) - Downbeat China manufacturing activity added to gloom in most Asian stock markets on Thursday, while emerging market currencies faltered as the dollar charged ahead after the U.S. Federal Reserve's latest minutes hinted at stimulus tapering.
Europe was poised to follow Asia lower, with financial spreadbetters expecting Britain's FTSE 100 to open around 0.3 percent lower, Germany's DAX and France's CAC 40 each off as much as 0.5 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan shed about 1.2 percent, at one point touching its lowest point since late last week. The softer China manufacturing and Fed speculation also weighed on emerging market currencies, sending the Indonesian rupiah to its lowest mark in nearly five years.
But Japan's Nikkei stock average bucked the region, surging 1.9 percent as the yen weakened to a four-month low against the dollar, and on plans by a major government fund to invest more of its $2 trillion funds in riskier assets.
Activity in China's vast factory sector grew at a milder pace in November on shrinking new export orders, the preliminary private Flash Markit/HSBC Purchasing Managers' Index (PMI) showed, raising concerns that China's economy could lose some vigour in the fourth quarter.
A sub-index measuring new export orders fell to a three-month low of 49.4 in November from 51.3 in October, reflecting weak external demand from developed countries.
"It's pretty well known that China's economy is slowing down, but the flash PMI was a bit weaker than expected so it was a factor for the correction today," said Larry Jiang, chief strategist at Guotai Junan International Securities.
In the Oct. 29-30 Fed policy meeting minutes released on Wednesday, officials indicated that they could decide to start scaling back the asset purchases at one of their next few meetings provided this was warranted by economic growth.
"The headline that most participants saw tapering in the next couple of meetings cannot be much of surprise, since the alternative is a virtual indefinite postponement," Steven Englander, global head of G10 FX strategy at CitiFX, wrote in a note to clients.
The dollar index, which tracks the greenback against a basket of major currencies, rose slightly to 81.149 after it climbed 0.4 percent on Wednesday, marking its biggest one-day gain in about two weeks.
The dollar added about 0.7 percent against its Japanese counterpart, buying 100.70 yen, after earlier rising as high as 100.83 yen, its loftiest level since late July.
The euro gave up about 0.1 percent to $1.3428. It was also buying 135.27 yen, recovering 0.7 percent on the day but still off a four-year high of 135.94 yen touched on Wednesday.
The single currency plunged on Wednesday after a Bloomberg report said the ECB was considering cutting its deposit rate, one of its two key interest rates, to below zero. An ECB spokesperson declined to comment on the report.
The Aussie dollar hit a one-week low of $0.9291 on the factory survey outcome from China, Australia's biggest export market. It last stood at $0.9302.
The Bank of Japan maintained its ultra-loose monetary policy at the end of its two-day meeting on Thursday as widely expected, and reiterated the economy is moderately recovering.
Markets are focusing on what Governor Haruhiko Kuroda will say in his post-meeting news conference about speculation of more easing by the ECB and uncertainty about when Fed will slow its asset purchases.
In commodities trading, Brent crude oil gave up earlier gains and slipped 0.3 percent to $107.73. It surged by more than $1 a barrel in the previous session after a U.S. official said it would be "very hard" to get a nuclear agreement with Iran this week.
U.S. oil futures for January delivery shed about 0.3 percent to $93.59, after reversing gains on Wednesday following release of the Fed minutes.
Three-month copper on the London Metal Exchange fell by about 0.1 percent to $6,987 a tonne, pressured by the tapering concerns and the softer China manufacturing.
Spot gold edged up to $1,247.81 but was still trading near four-month lows after its biggest drop in seven weeks in the previous session.