SINGAPORE - Asian shares retreated on Wednesday, tracking losses in U.S. stocks, and pressured by a weak dollar which sat close to a record low struck against the euro late on Tuesday.
Crude oil prices dipped below $49 a barrel after an increase in U.S. heating fuel stocks eased supply concerns, while gold was flat above the key $450 an ounce support level.
Japanese government bonds moved up as stocks fell, but caution ahead of a 10-year auction on Thursday capped gains. U.S. Treasuries were flat following losses scored in the United States after technical levels were breached.
Dealers said the dollar would trade in tight ranges for a few days after weeks of heavy selling.
"The dollar remains in a correction phase from recent heavy selling, after hedge funds closed books for the year and European officials voiced concerns (over the euro's rise)," said Toshiaki Kimura, chief forex manager at Mitsubishi Trust and Banking. European central bank chief Jean-Claude Trichet repeated on Tuesday that recent moves in the euro were not welcome, but also expressed confidence the United States would act to reduce the deficits which have been hurting dollar sentiment.
Those comments helped to push the euro to a fresh record high of $1.3336 overnight, but traders said there was now a lull in place ahead of Friday's key U.S. jobs data, which could provide clues to whether the Federal Reserve will raise interest rates later this month.
In Asian trade the dollar eased to $1.3291 against the euro, versus $1.3282 in late New York trade, and around 102.81 yen, from 103.08 in late U.S. trade but off a 4-1/2-year low of 102.15 yen hit on Friday.
RETAILERS WEAK
The dollar's persistent weakness weighed on stock markets in Asia as investors worried about the impact of strong local currencies and weak U.S. consumer confidence on their exports.
Tokyo's benchmark Nikkei average had fallen 1.02 percent by midday to 10,788.21, Hong Kong's Hang Seng Index fell 0.63 percent to 13,970.89, and an MSCI index of non-Japan shares fell 0.45 percent to 254.21.
World stocks as measured by the MSCI fell 0.11 percent to 273.88.
Asia's biggest retailer Aeon Co. and the department store chain Isetan dipped 3.0 and 3.3 percent, respectively, after a Goldman Sachs downgrade citing harsh domestic sales conditions for leading retailers.
Funai Electric Co., a major supplier of DVD players, televisions and other video equipment to Wal-Mart, fell 2.2 percent in the wake of a weak sales outlook from the number one U.S. retailer at the weekend. Shares in other export firms like Japan's Canon and South Korea's Samsung were down 1.1 percent and 1.7 percent respectively, leading the sector lower after private research company the Conference Board said U.S. consumer confidence had slipped to an eight-month low in November.
But Canon's rival Olympus Corp. rose 2.5 percent after it unveiled plans to launch a capsule endoscope in two years, aiming at a promising market for small cameras that patients swallow like pills to allow doctors to make internal examinations.
Singapore's Straits Times was up 0.31 percent.
Taiwan shares dipped more sharply than most after S&P cut the nation's debt rating outlook. The benchmark index fell 1.1 percent. Australia's S&P ASX 200 eased 0.23 percent and South Korea's KOSPI fell 0.22 percent.
The U.S. 10-year note was yielding 4.35 percent, unchanged from New York and the yield on 10-year JGB futures fell half a basis point to 1.44 percent.
Gold was flat compared with New York levels at $451. U.S oil prices as measured by January NYMEX crude futures dipped 14 cents to $48.99 a barrel.
U.S. stocks closed lower. The Dow Jones industrial average fell 0.46 percent and the Nasdaq Composite Index dropped 0.48 percent.