Asian stocks fell on Friday and were on course for their biggest weekly loss in nine months, as investors shunned risk on concerns about the pace of policy tightening within the region and escalating tensions in Egypt.
A broad sell-off in Asia since the start of 2011 on inflationary worries has shown no signs of abating, as worries about the scale of monetary tightening has encouraged the continuing rotation out of emerging and into developed markets.
Analysts said the selling pressure could have some more room to run, especially in countries where markets are ripe for a pullback after last year's stellar gains and the near term outlook for more monetary tightening is unclear.
On Friday, Seoul shares <.KS11> gained after the central bank surprised markets by leaving rates unchanged while Australia's benchmark index <.AXJO> snapped a seven-day winning streak as investors took profits from banking and resource shares.
MSCI's index of Asia Pacific shares-ex-Japan <.MIAPJ0000PUS> is set to fall by more than 3 percent this week, its worst performance since the Greek debt crisis erupted in May 2010.
So far this year, Asian shares have underperformed the MSCI world index <.MIWD00000PUS> by more than 4 percentage points amid frothy valuations in some markets in South and Southeast Asia and a drip of strong data out of the United States.
Pressure on emerging market equities may well, therefore, continue while uncertainties about the intensity, duration and effect of the ongoing tightening cycle remain alive, Barclays strategists said in a weekly note.
This week alone, China raised interest rates, Philippines held rates but raised its inflation forecast and Bank of Korea surprised markets by holding rates steady.
Foreign selling has picked up in Asian shares, especially in South Korea this week while offshore selling in Taiwan on Thursday was its biggest in six months.
Indonesian shares <.JKSE> fell 0.4 percent with shares in PT Garuda Indonesia
Japanese markets were closed for a national holiday.
Copper rose back above $10,000 per ton, while tin prices hit a record high as strong U.S. jobless data reassured investors about the pace of the recovery in the world's biggest economy.
Egyptian President Hosni Mubarak's plans to relinquish powers but not step down did little to boost investor hopes of a quick solution to the Egyptian crisis and gave a small leg up to oil prices.
Gold, was steady at around $1,364 an ounce and U.S. crude oil futures rose 88 cents to $87.61 a barrel.
In the currency markets, the dollar edged higher after notching up solid gains against the euro overnight, after traders said the European Central Bank stepped in to rescue a failing Portuguese bond auction.
Broad trading patterns in the euro are in line with wave formations and the single currency may be in the initial stages of what may be a decline toward the lower end of a broad 1.3250-1.3850 range.
Any easy gains in the EUR are susceptible to rapid reversal, said David Watt, senior currency strategist at RBC Dominion Securities.
The Australian dollar extended losses after the central bank said interest rates were likely to be on hold for some time.
(Additional reporting by Ian Chua, Reuters FX analyst Krishna Kumar in Sydney and Nick Trevethan in Singapore; Editing by Alex Richardson)