The dollar skidded against the euro and the yen on Tuesday after a British newspaper reported that Arab states were in talks to end using the dollar for oil trading, but Asian shares rose as U.S. services sector data lifted investors' mood.
The dollar slid to about $1.4709 against the euro, from $1.4664, and to as low as 88.97 yen, from 89.40, after the report in Britain's Independent newspaper.
Citing unidentified sources, the paper said Gulf Arab states were in secret talks with Russia, China, Japan and France to replace the dollar with a basket of currencies and gold for trading in oil within nine years.
This is U.S. dollar negative news which is moving markets and shows that central banks not just in Asia are looking to diversify away from the dollar, said Jonathan Cavenagh, currency analyst at Westpac.
Gold edged up to $1,018.85 an ounce from just above $1,015.
Shares across Asia gained as upbeat U.S. services data buoyed investors, offsetting disappointment over U.S. payrolls last Friday.
All eyes were on Australia amid mounting speculation the central bank could announce a surprise rate rise at 0330 GMT (11:30 p.m. EDT). That kept the Aussie dollar on a strong footing. It was quoted at $0.8780, up from $0.8727 on Monday.
A rise would make Australia the first G20 nation to raise rates since the crisis worsened with Lehman's collapse last year.
Analysts said the Aussie, up 24 percent against the dollar this year, was likely to remain relatively firm even if the Reserve Bank of Australia keeps rates unchanged.
The Aussie may dip slightly against the dollar if the RBA holds rates, as an immediate reaction. But it will keep its firm trend, said Hideki Hayashi, global economist at Mizuho Securities in Tokyo.
Australian shares trimmed early gains ahead of the rate decision, but investor sentiment across the region was boosted by data showing the U.S. service sector expanded last month for the first time in a year.
The data came as a relief after Friday's payrolls data showing U.S. employers unexpectedly cut more jobs in September than in August and helped the Dow Jones <.DJI> to a 1.2 percent gain.
The MSCI index of Asia Pacific stocks traded outside Japan <.MIAPJ0000PUS> and the Thomson Reuters index of regional shares <.TRXFLDAXPU> were both up 1 percent.
China's markets are closed until Friday for public holidays.
Japanese shares were more subdued, with the Nikkei index <.N225> flat, as the yen's recent strength has raised concern about exporters' earnings.
In Korea, equities rose 0.1 percent as Samsung Electronics <005390.KS>, the world's top maker of memory chips and flat-screen TVs, announced a higher-than-expected third-quarter earnings forecast.
Samsung's share price rose 1.2 percent and has rallied 68 percent this year as tech stocks outperformed the market.
Asian currencies were generally firmer as the dollar came under pressure.
The New Zealand dollar, up nearly 50 percent since early March, touched a 14-month high after data showed a rebound in business confidence.
The South Korean won hit a one-year high against the U.S. dollar. It and then retreated on suspected intervention by the authorities while a finance ministry told Reuters the authorities were ready to intervene if the won overshoots fundamentals.
U.S. crude oil futures stayed above US$70 a barrel, inching up to US$70.47 and helped by the U.S. services data.
(Additional reporting by Anirban Nag in SYDNEY and Kaori Kaneko in TOKYO; Editing by Jan Dahinten)