The U.S. dollar climbed to multi-year peaks against the euro and yen in Asia on Tuesday amid starkly diverging outlooks for interest rates globally, while currencies from emerging markets came under mounting pressure from risk aversion.
The skittish mood spread to Asian stocks as MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.6 percent.
Driving the dollar was speculation the Federal Reserve would start lifting interest rates from mid-year, while central banks in the European Union and Japan were busy easing policy by buying billions in government bonds.
The dollar also broke higher on the yen to reach 122.02 JPY, a number not visited since July 2007.
EU Bond Buying
The European Central Bank began its trillion-euro bond buying campaign on Monday, nudging down yields in Germany and other core EU sovereigns.
Selling in the euro gathered pace through the Asian session as a break of $1.0822 EUR triggered stop-loss offers and took it to $1.0785, the lowest since September 2003. Bears are now eyeing a major layer of chart support at $1.0762.
The prospect of rising U.S. yields was threatening to attract funds from emerging markets, causing strains in many countries, including New Zealand, S. Korean, Brazil and Turkey.
Most commodities continued to struggle with the strength of the U.S. dollar. Gold fell to a three-month low around $1,159.20 an ounce, while copper futures lost 0.5 percent.
Producer prices continued to slide, underscoring deepening weakness in the economy and intensifying pressure on policymakers to find new ways to support growth.