A tepid rally in Asian shares faltered early on Thursday and the dollar rose after Fed Chairman Ben Bernanke's reaffirmation of an extended period of low U.S. rates boosted risk-seeking but also raised some concerns about global growth.
Japan's Nikkei average rose initially, helped by exporters such as Canon Inc and as Toyota Motor Corp reversed most of the losses of the past two days after its chief apologized to consumers and pledged reforms to skeptical lawmakers at U.S. Congressional hearings. Toyota's U.S.-listed shares jumped 3.9 percent.
But a more than 2 percent slide in Denso Corp weighed on the broader Tokyo market after authorities said the FBI has raided three Detroit-area Japanese auto parts makers for a sealed federal antitrust investigation, including Toyota suppliers Denso and Tokai Rika
The market welcomed a rebound in U.S. stocks after news that the country will continue its low rate policy, said Yutaka Miura, a senior technical analyst at Mizuho Securities.
But we've seen a series of worse-than-expected economic data from America lately and uncertainty about the outlook for the U.S. economy is increasing.
The MSCI Asia ex-Japan index fell 0.43 percent, and sectors that fell the most were industrials and technology. The Nikkei was down 0.2 percent at 10179.79
A report on U.S. new home sales on Wednesday highlighted the Fed's predicament. Sales slumped more than 11 percent to a record low, suggesting the sector at the epicenter of the financial crisis had yet to fully heal.
Bernanke's assessment of the economy was also grim, further curbing the speculation of quicker policy tightening that had been spurred by last week's raising of the discount rate.
He also said a weak job market and tame inflation warrant low interest rates for an extended period, making clear policy tightening is some time away and boosting the Dow Jones Industrial average by 0.89 percent.
The dollar fell initially in Asia but the trade-weighted index soon recovered to 80.96, reaching for Monday's highs.
Gold was at $1,096 an ounce, far from Wednesday's high of 1,107.95 and down 3 percent from Monday's peak above 1,130.
Oil prices also hovered just above the $80 mark but were also off Wednesday's highs at $80.45, a level hit when stock markets rallied on the back of Bernanke's remarks despite a bearish report showing a build up in U.S. crude stockpiles.
The euro stayed weak at $1.3483, paring further the gains it had made soon after Bernanke's remarks and heading closer to a nine-month low of $1.3442 struck last week.
Worries about a possible downgrade of Greece weighed on the European single currency, pushing it down from above $1.36 on Wednesday.
Standard and Poor's said it may cut Greece's BBB+ rating by one or two notches within a month, citing downside risks to growth that could hinder the country's deficit-cutting plans.
The Greek situation remains fluid. So acrimonious discussions between Athens and Brussels could easily result in further near term euro slippage, Citi said in a note.
But Citi also said that with euro net short positions at a record high, any positive news from Greece in the coming weeks could lead to a bounce in the single currency.
The euro has lost over 10 percent since late November as fiscal woes in Greece intensified in the past few months leading to a huge sell-off by investors.
The currency hit its lowest level in a year against the yen, hitting 120.62 yen on trading platform EBS, as hedge funds liquidated positions in yen crosses.
(Additional reporting by Aiko Hayashi in TOKYO, Anirban Nag in SYDNEY, Kaori Kaneko in Tokyo; Editing by Kazunori Takada)