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The dollar held near multi-year highs against the yen on Monday after surprisingly strong US labour data, but demand for riskier assets was curbed after a mixed bag of economic data from China painted a patchy economic recovery in the world's second-largest economy.
Commodities prices were caught between growing optimism about more solid demand as the global economy improves and the strengthening dollar which makes dollar-denominated commodities expensive for non-dollar holders.
The MSCI's broadest index of Asia-Pacific shares outside Japan held steady but were weighed by a 0.1% drop in South Korean shares and a 0.3% decline in Shanghai shares.
Demand for riskier assets was curbed by caution after a mixed bag of data from China over the weekend painted a patchy economic recovery in the world's second-largest economy and top consumer for many commodities. The data signalled a looming dilemma for policymakers, as inflation stood at a 10-month high in February while factory output and consumer spending were weaker than forecast.
"That's what people are trying to marry up, they've seen the Chinese data over the weekend, and it's been a little bit below their expectations and so miners aren't doing very well and the rest of the stocks seem to be pretty patchy at the moment," said Credit Suisse equity strategist Damien Boey of Australian stocks.
Australian shares rose 0.4% in choppy trade as weak iron ore prices hit miners while financials stocks were up on the back of further gains on Wall Street. The commodity-linked Australian dollar was down 0.1% to $1.0221.
In South Korea, investors were jittery amid intensifying tensions with North Korea.
The South Korean won fell as much as 1.1% for its biggest daily decline since January 28 to a low of 1,102.8 against the dollar, its weakest level since October 25, 2012.
North Korea has cut off a Red Cross hotline with South Korea as it escalates its war of words against Seoul and Washington in response to a military drill in the South and UN sanctions imposed for its recent nuclear test.
Fundamentals boost dollar
The Dow Jones industrial average posted its fourth consecutive intraday and closing record highs on Friday and the FTSEurofirst 300 index of top European shares hit a 4-1/2-year peak after US nonfarm payrolls jumped by 2,36,000 jobs last month, above a 1,60,000 gain forecast. The unemployment rate fell to a four-year low of 7.7% from 7.9%.
The data was unlikely to prompt the Federal Reserve to change its policy settings anytime soon as the US central bank has said it will keep its near-zero rate stance until the unemployment rate falls to 6.5%, as long as inflation does not threaten to top 2.5%.
"As both Europe and Japan look to continue with easy monetary policy, improving economic indicators in the United States make it likely that the US would be the first to depart from global accommodative conditions, putting upward pressures on yields and supporting the dollar," a senior official at a Japanese institutional investor said.
"It's too early yet to say the current dollar buying based on solid US fundamentals is sustainable. Effects from US spending cuts may start to weigh on growth later on and undermine the dollar," he said.
The dollar was up 0.2% against the yen at 96.18, near Friday's peak of 96.60 yen hit after the US jobs data, its highest since August 2009. The euro was also trading up 0.2% at 125 yen but off a high of 125.98 yen touched on Friday.
"Much of the recent move in the US dollar is a reflection of more fundamental money flows out of the yen and out of the euro concurrently, and that is enough of an effect -- a truly massive effect -- to nudge the dollar higher," said Richard Hastings, macro strategist at Global Hunter Securities.
"This is of course a big change from forex conditions years ago."
The yen's slide bolstered Japanese equities, with the Nikkei stock average gaining 0.9% to a fresh 4-1/2-year high.
Currency speculators boosted their bets in favour of the US dollar in the latest week to the highest in over seven months, while also raising short positions in most other major currencies, such as the yen, the euro and sterling, data from the Commodity Futures Trading Commission showed on Friday.
US crude was down 0.3% at $91.68 a barrel while Brent fell 0.4% to $110.43.
London copper inched up 0.3% to $7,761 a tonne.
