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MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.7% to its lowest since July 11, and Tokyo's Nikkei slid to a one-week trough as the dollar slumped to a six-week low against the yen.
Exporters such as Toyota Corp lost ground on concerns the stronger yen would erode their dollar earnings when repatriated. The Nikkei skidded as much as 2.6% to 14,020 in morning deals, before paring its fall to under 2%.
However, it may slide below support at 14,000 if the dollar breaks below 97 yen, analysts said, adding the looming settlement of some equity options were also creating volatility.
"Hedge funds like commodity trading advisors are shorting through some of the European brokerages," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
"They could also be selling index heavyweights to lower futures prices before the Nikkei 225 options settlement on Friday."
No clarity
The soggy performance on Asian bourses came after the US S&P 500 index fell 0.6%, partly on uncertainty about when the Federal Reserve will begin to scale back its stimulus.
Investors keen for clarity on the timing of the Fed's plan were left sorely disappointed after comments from two top Federal Reserve officials shed no new light.
This uncertainty coupled with thin trading conditions and a lack of fresh impetus conspired to keep the greenback pinned down against a basket of major currencies.
The dollar index held near a one-week low as the greenback slid to 97.09 yen, a level last seen on June 25. The euro, while a touch softer on the day at $1.3296, remained near a one-week high around $1.3323.
Commodities were also struggling in dull summer trade, with gold extending losses into a third session as it fell to three-week low of $1,273.14 an ounce.
Copper slipped 0.6% to $6,966 a tonne, erasing all the gains it made on Tuesday, while US crude was little changed near $105 a barrel.
There is little major economic data out of Asia on Wednesday. The key focus is the Bank of England's inflation report, in which it is expected to assure markets that it will keep interest rates at rock-bottom levels for an extended period.
On Thursday, the Bank of Japan will announce the outcome of its two-day policy review, and is widely expected to press on with its massive asset-buying program.
Recent data showed the world's third-biggest economy is starting to stir thanks to the BOJ's unprecedented quantitative easing push and government fiscal stimulus.
