The dollar sank to a 16-month low against a basket of currencies on Thursday as investors bet U.S. monetary policy would continue to be loose, while a report that Chinese inflation will rise dragged on equities.
World stocks were flat to lower despite a burst of corporate activity that would usually lift investors' spirits.
Glencore, the world's largest commodities trading company, plans to raise up to $12.1 billion in a London and Hong Kong stock market floatation that is London's biggest ever. Shares in Japan's Isuzu Motors jumped on a report that Volkswagen was considering buying all or part of it.
But European shares, as measured by the FTSEurofirst 300
were down a half a percent, partly out of concern that Chinese inflation is returning.
Hong Kong's Phoenix TV, citing an unnamed source, said China's annual rate of inflation in March was likely to be 5.3-5.4 percent, a 32-month high and just above an estimate in a Reuters poll.
Investors are particularly concerned about Chinese inflation in case government attempts to restrain it prompt a so-called hard landing for the economy.
Inflation in emerging economies has become a serious issue, as the impact from high commodity prices is stronger for those countries, said Arnaud Scarpaci, fund manager at Paris-based Agilis Gestion.
Earlier, Nikkei benchmark closed up 0.1 percent, held back by continued worries about the impact of its earthquake, tsunami and nuclear disasters.
The Reuters Tankan survey of 400 large firms found on Thursday that power shortages caused by the crippled Fukushima nuclear plant had hit nearly 60 percent of local companies, disrupting production and supply chains.
Wednesday's U.S. retail sales data and the Federal Reserve's Beige Book report did nothing to change the view the U.S. central bank would stick with its $600 billion asset buying program until June.
The European Central Bank, for example, has already raised interest rates and is expected to do so again, widening the premium for holding euros rather than dollars. Other economies are already much further on in raising rates.
The dollar index, which measures its strength against major currencies, fell around 0.4 percent, bringing its losses this year to around 5.5 percent.
The dollar fell as low as 83.20 yen, moving away from its 6-1/2 month high around 85.55 set last week. The euro was up 0.4 percent at $1.4496.
German government bond futures opened higher, holding onto modest gains made late in the previous session when U.S. debt prices rose on news of President Barak Obama's deficit-tackling plans.
The (Obama) plan made the right sort of noises and the equities didn't really move overnight so we're hanging on to last night's gains at the moment, a trader said.
(Additional reporting by Blaise Robinson, Natsuko Waki and William James; editing by Patrick Graham)