Asian shares fell on Friday and the dollar firmed as investors took profits on riskier assets after U.S. data raised fears that a global economic recovery could lose momentum.
The dollar <.DXY> edged up 0.2 percent against a basket of major currencies as some investors shifted back to safer assets despite extremely low yields.
Investors were unnerved by a report showing that a record one in seven U.S. mortgages were in foreclosure or at least one payment past due in the third quarter, signaling a recovery in the U.S. housing market will be tepid at best.
Investors have turned more cautious, and they are awaiting more U.S. data coming out next week, said Hwang Keum-dan, an analyst at Samsung Securities in Seoul, where shares were down 0.2 percent but outperforming most other Asian markets.
Tech shares suffered some of the heaviest losses in Asia after a U.S. brokerage downgrade on the semiconductor industry. The subsequent rout in U.S. tech stocks overnight helped push the S&P 500 index <.SPX> down 1.3 percent, its worst one-day percentage fall in three weeks. <.N>
The tech sector has been one of the leaders in a strong global equities rally that has extended into its ninth month.
Japan's Nikkei index <.N225> fell 1.3 percent and looked set for a fourth week of losses, with electronics giant Sony Corp <6758.T> sliding to a near four-month low on doubts the company's new business strategy could deliver strong profit growth.
The MSCI index of Asia Pacific stocks traded outside Japan <.MIAPJ0000PUS> and the Thomson Reuters index of regional shares <.TRXFLDAXPU> were both down around 1 percent.
In Taiwan, the world's biggest contract chipmaker TSMC <2330.TW>, which sells the bulk of its chips to North America, fell 2.4 percent.
Unless Christmas sales (of technology products) are very good, we don't think the market can rebound significantly, said Alex Huang, director of Mega International Securities in Taipei.
However, analysts said the retreat from equities may be temporary as excess global liquidity will continue to encourage fund inflows into Asia. The region's economies are showing signs of rebounding from the global financial crisis far faster than the United States, the UK and Europe, where consumer sentiment remains fragile.
In Hong Kong -- which has attracted record fund inflows of more than $70 billion since October last year -- central bank chief Norman Chan warned that rapid inflows, which are raising the risk of asset bubbles, posed a dilemma for policymakers across Asia.
Even if economies in the region raised interest rates, that could make dollar carry trades even more active and aggravate fund inflows, Chan said.
Carry trades involve borrowing money in a low-yielding currency and using the funds to invest in other assets which potentially offer far higher returns.
Asian currencies also suffered on Friday as investors retreated from riskier assets, sending the Korean won to a three-week low at 1,164.2 to the dollar.
The yen, like the dollar, benefited from demand for safer assets, adding pressure on shares of Japanese exporters.
Japanese government bond futures hit a fresh seven-week high as the stock market sagged and were also buoyed by stronger U.S. Treasuries.
Crude oil futures gained 22 cents to $77.68 a barrel after losing 3 percent in New York on fears that lackluster economic growth would limit energy demand.
Gold was slightly weaker at $1,140.30 an ounce as the dollar gained ground, retreating after hitting another record at $1,152.75 an ounce earlier this week.
(Additional reporting by Baker Li in TAIPEI; Editing by Kim Coghill)