Asian stocks slid to a near three-week low on Thursday on growing doubts about global economic growth that also helped the dollar cling to its gains after it scored its biggest rise in nearly two years.

The dollar climbed against all major currencies save for the yen, which hit a 15-year high against the U.S. currency on Wednesday, prompting Japanese policymakers to voice concern about the currency's strength.

The verbal intervention and news that the Bank of Japan checked dollar/yen rates with banks -- an unusual step last taken during the yen's rally in November -- pushed the yen lower, helping Tokyo shares pare early losses.

High yielding currencies such as the Australian and New Zealand dollars and commodity prices also wilted following news of a surprisingly large U.S. trade deficit and a downgrade of Britain's growth forecast by the Bank of England.

European markets were marginally higher in early trade with Britain's FTSE 100 <.FTSE>, Germany's DAX <.GDAXI> and France's CAC-40 <.FCHI> all up by about 0.2 percent. But gains were limited as banks fell on concerns about the global recovery.

The U.S. trade gap widened 18.8 percent in June, suggesting its second-quarter economic growth was weaker than previously thought. The report follows the Federal Reserve's gloomier economic outlook published earlier this week and a spate of data from China confirming its rapid imports and factory output growth was slowing.

We could see economies relapse and double dip or struggle through and begin to grow with private demand starting to carry their weight, said Peter Elston, strategist at Aberdeen Asset Management, which oversees $52 billion of Asian equities.

It is very unclear which of those two we are going to get. On a day like this, clearly the bears are in the driving seat.

The trade data clobbered the three major U.S. indexes, which logged their worst percentage drops in nearly a month as investors fled to safer assets. <.N>

The MSCI index of Asia Pacific ex-Japan stocks <.MIAPJ0000PUS> fell 1.4 percent, led by resources <.MIAPJMT00PUS> and energy sectors <.MIAPJEN00PUS>. It is at its lowest since July 23 and has slid back into negative territory for the year to date.

The flight to safety supported bids for U.S. Treasuries with the 10-year yields at near a 16-month low.

Meanwhile, the U.S. dollar held gains against a basket of other major currencies <.DXY> after rising nearly 2 percent at one point overnight, well above its 200-day moving average.

It hovered above a 15-year low against the yen, trading flat on the day at 85.30 yen. Overnight, the dollar hit a 15-year low of 84.72 yen on electronic trading platform EBS.

The yen's move away from its peaks helped Japanese stocks recoup some of earlier losses and the Nikkei average <.N225> closed 0.9 percent down after it hit a 13-month low earlier in the session.

Many Japanese exporters had set their currency rate assumptions at around 90 yen per dollar for the financial year to next March.

The yen has gained nearly 9 percent against the dollar so far this year as investors looked to lower-risk assets, even though Japan's economy appears far more frail than that of the United States.


The Australian dollar, which is highly influenced by global growth expectations, struck a two-week, and the New Zealand dollar was down to a three-week low. Both recovered but were still nursing steep losses from recent highs.

Adding to the Aussie's woes was data which showed July unemployment rose more than expected, which lessens the risk of wage pressures building and argues against a further rise in interest rates any time soon.

Oil slipped for a third straight day on mounting fears that a slowdown in the global economic recovery would cut commodities demand.

London Brent crude futures fell 84 cents to $76.80 a barrel, afte5r falling as much as $1 at one point.

Gold regained strength after falling the previous day when investors sold bullion to cover losses in equities, but a firmer dollar was likely to cap gains.

Spot gold rose $2.20 to $1,199.20 an ounce, still hovering below the closely-watched 50-day moving average.

(Additional reporting by Elaine Lies in TOKYO; Editing by Tomasz Janowski)