The dollar's revival weighed on Asian markets, with Australian stocks falling and index futures signalling declines elsewhere amid an oil-led slump in commodity prices.
Australia's share benchmark fell a second day, headed for a three-week low after futures on equity gauges from Hong Kong to Seoul retreated in most recent trading. Contracts on Japan's Nikkei 225 Stock Average diverged as the yen pared losses against the dollar. The greenback held on to a four-day rally after Federal Reserve Bank of St. Louis President James Bullard joined a chorus of U.S. policy makers floating the prospect of an interest-rate hike as soon as April should the economic data warrant it. U.S. crude oil extended losses below $40 a barrel as Malaysian ringgit forwards slumped. Gold rallied.
After halving its projection for rate rises this year to two – a shift that spurred global stock gains and depressed the dollar – the Fed is back in the spotlight as its own officials start to tweak that rhetoric. The greenback's recovery from a three-week selloff is unsettling the mostly dollar-denominated commodity market, just as the prospect of a production freeze had revived crude oil prices and as investor sentiment remains fragile following the volatility at the start of the year. China's central bank chief is due to speak Thursday as traders in some parts of Asia wind down ahead of the Easter holiday.
"Nobody's really looking to make a substantial bet at this point," said Brad McMillan, chief investment officer of Commonwealth Financial Network in Waltham, Massachusetts, which oversees $100-billion. "The big story over the past couple of months has been an absolute loss of confidence and then all of a sudden the return of that confidence. The market's continuing to struggle with the implications of the Fed."
Vietnam is due to update on consumer prices Friday and Singapore issues data on factory output. Taiwan is expected to reduce its benchmark interest rate, while markets in the Philippines and India are already shut for holidays.
Mining shares and banks drove a 0.9 per cent drop in Australia's S&P/ASX 200 Index as of 8:42 a.m. Tokyo time. New Zealand's S&P/NZX 50 Index, the first major equity index to start trading each day in the Asia-Pacific region, fell 0.1 per cent Tokyo time, rising for a sixth straight day.
Futures on the Standard & Poor's 500 Index lost 0.1 per cent after the gauge fell 0.6 per cent Thursday, led lower by a 2.1 per cent slide in energy stocks.
Contracts on on South Korea's Kospi index declined 0.2 per cent in most recent trading, while in Hong Kong, Hang Seng Index futures dropped 0.9 per cent. Those on the Hang Seng China Enterprises Index, a gauge of mainland Chinese stocks listed in the city, slid 1.3 per cent.
The outlook was more mixed for Japan, with Nikkei 225 futures bid down 0.3 per cent to 16,760, after rising 0.3 per cent in the previous session. Yen-denominated Nikkei 225 contracts were little changed at 16,795 in Chicago, as Singapore-traded futures held around 16,850.
"Extreme global risk-off sentiment has diminished and now people are turning neutral again – however there's a limit to how much buying demand there is," Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co. in Tokyo said by phone. "Investors aren't feeling risk-on enough to pile into Japanese shares. It depends on how much U.S. shares rise. If the Dow Jones rises past 18,000, then Japanese shares will look relatively cheap and investors will start to buy it."
The yen, which typically moves at odds with Japanese shares, was little changed at 112.44 per dollar after closing down less than 0.1 per cent Wednesday.
One-month non-deliverable forwards on the ringgit sank 1 per cent to 4.0260 per dollar as West Texas Intermediate crude slid another 0.6 per cent to $39.57 a barrel, extending last session's 4 per cent tumble.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was little changed after jumping 1.3 per cent over the past four days.
Bullard joined a growing line up of U.S. policy makers on Wednesday by emphasizing evidence of an improving economy may mean rates have to be hiked sooner rather than later. San Francisco Fed President John Williams and Atlanta Fed President Dennis Lockhart made similar comments earlier this week, saying borrowing costs may need to be increased as soon as the April meeting.
WTI posted its biggest loss in six weeks on Wednesday after U.S. government data showed the nation's crude stockpiles climbed the most since December. Inventories rose last week by more than three times what was projected in a Bloomberg survey of analysts, and imports reached the highest level since June 2013, the Energy Information Administration report showed. Brent crude lost 3.3 per cent to $40.47 a barrel.
"This highlights the fact that those expecting a tightening market are still just hoping," said Kyle Cooper, director of research with IAF Advisors and Cypress Energy Capital Management in Houston. "I agree that we'll eventually see a tightening, but there's no evidence it's happening yet."
Copper futures were little changed at $2.2375 a pound in New York, after sliding 2.4 per cent last session, while gold was up 0.2 per cent to $1,222.47 an ounce following a 2.3 per cent retreat on Wednesday.
–With assistance from Inyoung Hwang Anna Kitanaka and Nao Sano