HONG KONG - Asian markets fell on Tuesday after a top official at the US Federal Reserve said the bank might announce a small cut in its stimulus programme next week.
With a string of upbeat US data pointing to a pick-up in the economy and boosting confidence, the Japanese yen - considered a haven during uncertainty - came under pressure against the dollar and euro as investors seek out higher-yielding, "riskier" assets.
Tokyo eased 0.25 per cent, or 38.90 points, to 15,611.31, Sydney was almost unchanged, edging down 0.8 points to 5,143.6 and Seoul gave up 0.35 per cent, or 6.93 points, to end at 1,993.45.
Shanghai closed flat, edging down 0.71 points to 2,237.49 while Hong Kong lost 0.28 per cent, or 66.98 points, to end at 23,744.19 after China released a mixed set of data showing growth in industrial output slowing while retail sales picked up speed.
James Bullard, the president of the Fed's St. Louis branch, said Monday that "a small taper" of the bank's US$85 billion (S$106.30 billion) a month bond-buying scheme could be on the cards at its December 17-18 policy meeting.
He said "the probability of a reduction in the pace of asset purchases has increased" with evidence of accelerating job gains and the likelihood those advances will continue.
His comments came after the government last week said the unemployment rate had slipped to 7.0 per cent in November from 7.3 per cent in October, while a healthy 203,000 jobs were created - more than expected.
Days earlier Washington said the economy grew 3.6 per cent in the July-September quarter, well above the 3.0 per cent predicted by analysts.
The positive numbers have spurred expectations of a "taper" to the stimulus after the Fed had indicated on several occasions it would only do so when the economy showed it was strong enough to stand on its own two feet.
In New York the Dow edged up 0.03 per cent, the S&P 500 advanced 0.18 per cent to a new record high and the Nasdaq added 0.15 per cent.
However, Kengo Suzuki, forex strategist at Mizuho Securities, said: "It's still hard to tell when the Fed may begin its roll-back."
He added that he still only saw a small chance of the Fed trimming its measures beginning in December. "I'd say there's a 10 per cent chance the Fed will begin tapering in December, a 50 per cent chance it will do so in January and a 40 per cent chance in March."
The brighter outlook in the US economy, along with strong Chinese trade data at the weekend, has boosted confidence, which in turn has pushed the dollar and euro higher.
The dollar bought 103.10 yen (S$1.250) in afternoon Tokyo trade, compared with 103.28 yen in New York Monday and hovering just below its five-year highs.
The euro sat at US$1.3749 against US$1.3737. It also fetched 141.90 yen from 141.89 yen - levels not seen since late 2008.
On oil markets, New York's main contract, West Texas Intermediate for January delivery, was up 42 cents at US$97.76 a barrel in afternoon trade, while Brent North Sea crude for January rose 31 cents to US$109.70.
Gold fetched US$1,247.49 per ounce at 0820 GMT compared with US$1,228.36 on Monday.