Asian shares fell on Wednesday, led by Chinese markets, with soft commodity prices making investors nervous a broader pullback in risk taking may be unfolding.

This week's 14 percent plunge in silver prices and a lower-than-forecast manufacturing growth reading in China have made investors nervous about holding big bets ahead of the European Central Bank meeting on Thursday and the April U.S. payrolls report due on Friday.

Sentiment was also turning negative after the U.S. S&P 500 stocks index <.SPX> , which hit a 3-year high on Monday, closed lower for a second day, hurt by fears that corporate earnings would not live up to high expectations.

Risky assets are having a respite, having advanced rather quickly in more recent weeks, said Andy Ji, a currency strategist and economist with Commonwealth Bank of Australia in Singapore.

I continue to see fundamental support either waning or fully priced in many risky assets, including currencies that are more risk-sensitive.

The U.S. dollar was steady though had gained as much as 0.7 percent on the day against a basket of currencies <.DXY>, rebounding from a near 3-year low hit on Monday, as hedge funds unwound some stretched short positions against the dollar vs Asian currencies.

Deutsche Bank's internal gauge of market positioning that tracks moves among hedge funds had shown that long positions in some of the Asian currencies had been close to a record high as of last Thursday, said Mirza Baig, the bank's senior currency strategist in Singapore.

In general it feels really, mostly like a position reduction kind of a move, he said, referring to the dollar's broad rise against emerging Asian currencies.Positioning was dcurrencies. Positioningefinitely quite stretched.

Ji said the likelihood of further unwinding was making some Asian assets less attractive.

While I still think the general USD weakness would linger and provide a lift to risky assets, the trade-off in chasing aggressively the strength in these assets has turned less attractive or is dependent primarily on the extent of USD weakness in the coming months, he said.

Chinese and Hong Kong stock markets were stung by weakness in commodity-related shares as well as a glut of new equity issuance.

Hong Kong's Hang Seng fell 1.6 percent <.HSI> to a one-month low and Shanghai's composite index slid 2.3 percent <.SSEC>, with losses the most acute in cyclical sectors such as oil and coal producers and metals and mining companies.

Glencore International AG , the world's largest diversified commodities trader, set the price range for its London and Hong Kong IPO, enabling it to raise up to $10 billion, three sources told Reuters on Wednesday.

MSCI's broadest index of Asia-Pacific shares excluding Japan <.MIAPJ0000PUS>, which also has a strong correlation to silver prices, fell 1.5 percent.

Japanese markets were closed for holidays.

Silver suffered its biggest two-day loss since October 2008, dragging down gold and other commodities. After hitting an all-time high within a whisker of $50 an ounce last Thursday, spot prices were at $41.16 on Wednesday, down 1.2 percent. Gold was also down about 0.5 percent.

Oil prices were dragged down after data showed U.S. crude stocks rose sharply last week, adding to concerns about demand and gains in the dollar that helped spark a technical sell-off.

However, ICE Brent crude for June fought back from early deep losses and traded at $122.32 a barrel, nearly unchanged on the day but still near Monday's low of $121.67.

In currency markets, euro/sterling was at 0.8990, within striking distance of a 13-mth high of 0.9006 hit on Tuesday. The pair climbed one percent on Tuesday after disappointing UK PMI data signaled that a rate hike may be further away than expected.

In contrast, the European Central Bank is expected to signal its readiness to raise interest rates after its policy meeting on Thursday, and may prepare the market for a June hike.

(Additional reporting by Masayuki Kitano and Jongwoo Cheon; Editing by Richard Borsuk)