MSCI's broadest index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> fell about 1.4 percent at its lowest level since
Japan's Nikkei stock average <.N225> lost 2.9 percent, extending its
declines into a fourth session.
But the greenback's descent took a breather, with the dollar index
<.DXY> gaining 0.1 percent to 81.101.
Data showing U.S. manufacturing activity slowed sharply last month
dealt a heavy blow to markets already worried that the U.S. Federal
Reserve's decision to taper its asset purchases would lead to
capital flight from emerging markets.
"Investors should steer clear of risk assets over the short term as
the turmoil does not look like it will be over anytime soon," Mitul
Kotecha, the Hong Kong-based head of global foreign exchange
strategy for Credit Agricole, said in a note to clients.
"A combination of tapering, a confluence of country-specific
emerging market concerns and weaker growth in China provide the
backdrop for a volatile few weeks if not longer, ahead," Kotecha
The yield on benchmark 10-year U.S. Treasury notes stood at 2.587 in
Asian trading, after falling as low as 2.582 percent on Monday, the
lowest since November 1.
January's sharp fall in U.S. output activity came on the back of the
biggest drop in new orders in 33 years, while construction spending
barely rose in December, suggesting the U.S. economic recovery is
more tenuous than some investors had believed.
The data helped launch the benchmark S&P 500 index on its worst
single-day drop in seven months, while the CBOE volatility index
soared 16.5 percent to close at its highest level since December
That helped send the dollar as low as 100.77 yen and the euro as low
as 136.37 yen, levels neither pair had touched since late November.
[to top of second column]
In Asian trading, the dollar took back some lost ground, adding
about 0.3 percent to buy 101.24 yen, while the euro rose 0.2 percent
on the day to 136.84 yen.
The Australian dollar was slightly lower at $0.8738, as investors
awaited the Reserve Bank of Australia's policy decision due at 0330
All analysts polled by Reuters expected the RBA to keep its 2.5
percent cash rate intact, although some said the central bank might
drop its easing bias.
On the commodities front, U.S. oil edged up slightly to $96.53 a
barrel, after plunging $1.09 on Monday as the weaker-than-expected
U.S. factory data fanned fears about demand in the world's largest
The stock market selloff added to the safe-haven appeal of gold,
with spot gold edging up to $1,258.84 an ounce, after gaining 1.1
percent on Monday.
(Editing by Richard Pullin and Eric
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