Asian equity markets fell on Friday after a broad global rally, but the dollar strengthened against most other currencies as traders become increasingly confident the Federal Reserve will hike interest rates this month.
Investors took their cash off the table on profit-taking Thursday after the previous day's surge fuelled by Donald Trump's address to Congress, in which he promised massive infrastructure spending and tax cuts.
But with Fed boss Janet Yellen due to speak Friday the greenback has bounced back as experts say the bank is odds-on to tighten monetary policy in the face of an improving US economy.
Comments from three top Fed officials, including a noted dove, have cemented those expectations.
"The Fed rate hike balloon has successfully been floated, and the market has continued to reprice the March rate hike probability fuelled by the dove of doves, Lael Brainard, who came out 'hawks-a-blazing' at exactly the appropriate time," said senior OANDS trader Stephen Innes in a note.
"With Brainard flying the dove's coup, she has tipped the scales in overwhelming favour of a rate hike as the market now views March as fait accompli."
The dollar, which has swung wildly as investors try to gauge Trump's plans and veiled Fed messages, broke above 114 yen for the first time in two weeks in Asia on Thursday and pressed on through the day.
In Tokyo it was down against the yen but well up from the levels below 112 yen touched earlier in the week, while it maintained recent gains against the euro and pound.
- 'Good for stocks' -
However, it surged against higher-yielding and emerging market currencies. It jumped more than one percent against South Korea's won, 0.2 percent on the Indonesian rupiah and 0.8 percent versus Australia's dollar. The New Zealand and Singapore dollars were also sharply lower.
Share traders headed for the door ahead of the weekend, after the week's surge.
Tokyo ended 0.5 percent lower, with dealers brushing off news that Japanese consumer prices rose last month for the first time in almost a year.
Hong Kong sank 0.6 percent in the afternoon while Shanghai ended 0.4 percent off, Seoul slipped 1.1 percent, Singapore shed 0.7 percent and Sydney dived 0.8 percent.
There were also big losses in Taipei, Wellington and Manila.
The losses follow selling in Europe and New York, where all three main indexes again hit record highs this week.
“The markets are in the short-term overextended,” Mark Matthews, Singapore-based head of Asia research at Bank of Julius Baer, told Bloomberg News. “Longer term, the reason why rates are going up is because the economy is getting better, and that’s good for stocks.”
Oil prices edged up marginally after tumbling more than two percent Thursday in reaction to the stronger dollar -- which makes the commodity more expensive for holders of other currencies -- and news that Russia was well short of its promised output cuts.
Despite agreeing to slash production as part of a deal with global producers to address a global glut, Moscow's reductions were only a third of what it pledged in January and February.
- Key figures around 0700 GMT -
Tokyo - Nikkei 225: DOWN 0.1 percent at 19,469.17 (close)
Hong Kong - Hang Seng: DOWN 0.6 percent at 23,580.10
Shanghai - Composite: DOWN 0.4 percent at 3,218.31 (close)
Euro/dollar: DOWN at $1.0515 from $1.0516
Pound/dollar: DOWN at $1.2260 from $1.2270
Dollar/yen: DOWN at 114.16 yen from 114.39 yen
Oil - West Texas Intermediate: UP 10 cents at $52.71 per barrel
Oil - Brent North Sea: UP 12 cents at $55.20
New York - Dow: DOWN 0.5 percent at 21,002.97 (close)
London - FTSE 100: FLAT at 7,382.35 (close)