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Asian stocks slipped and the euro stood tall against the dollar early on Thursday after US data overnight showed the economy grew much more slowly than expected in the first quarter.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5%. Japan's Nikkei shed 1.6% and South Korean and Australian shares also suffered losses.
The US economy grew just 0.2% in the first quarter, down sharply from the previous quarter's 2.2% growth. The disappointing data further dimmed already faint prospects for an interest rate hike in June by the Federal Reserve.
The euro was steady at $1.1118 > after surging to a near two-month high of $1.1188 in wake of the data. A rise in euro zone debt yields also helped the euro. German Bund yields posted their biggest daily rise in two years overnight on waning deflation fears and improved prospects for a Greek debt deal.
The common currency shed some of its gains after investors focussed on the Fed's monetary policy statement attributing the winter slowdown in US economic growth partly to transitory factors.
The Fed, however, took a dimmer view of the labour market after its two-day policy meeting ended late Wednesday.
"All in all, the FOMC statement gave a balanced assessment of the current economic slowdown and the Committee remains very much in a data-dependent mode. However, the balanced and cautious tone in the statement is a far cry from the optimism and (over)confidence that we have seen in previous statements," economists at Rabobank wrote in a note to clients.
The dollar was down 0.1% at 118.945 yen > after a choppy session overnight which took it between a low of 118.60 and a high of 119.36.
A rise in yields on US Treasuries, which saw the benchmark 10-year note's yield climb to a six-week high overnight amid a global bond sell-off, helped shore up the dollar.
The Australian dollar was little changed at $0.8001 > after marching to a three-month peak of $0.8077 overnight on the dollar's broad weakness.
Another factor aiding commodity currencies such as the Aussie was the recent surge in oil prices. US crude was down 0.3% at $58.43 a barrel
