Asian stocks sank on Monday with Tokyo's Nikkei hitting its lowest level in about 15 months as investors dumped Japanese exporters on the back of a surge in the yen to an 18-month high versus the dollar.
Worries over more credit-related losses at U.S. financial firms hit the dollar, sending it to a low near 110.20 yen -- a level last seen in May 2006.
The concerns were rekindled on Friday when Wachovia Corp, the fourth-largest U.S. bank, reported a potential $1.7 billion loss on mortgage-related debt.
It's getting to the point where everything seems scary, and that it's hard to trust what financial institutions are saying, said a trader for a major Japanese trading house.
Oil fell more than $1 after OPEC kingpin Saudi Arabia said on the weekend the exporter group would discuss an increase in oil output, and gold retreated, as the weaker oil price prompted investors to sell the metal after its recent rally.
Tokyo's Nikkei average ended the morning session down 2.4 percent at 15,208.78, while MSCI's measure of other Asia Pacific stocks shed 2.5 percent.
Having hit a record high on November 1, the MSCI index skidded 3.2 percent last week, its biggest weekly drop in about three months.
Investors dumped Japanese exporters on worries the falling U.S. dollar would translate into weaker revenues from overseas sales. Canon, Honda Motor and Sony Corp all fell more than 2 percent.
China's stock market tumbled upon opening after the central tightened monetary policy on Saturday, sending the Shanghai Composite Index down 2.5 percent.
Battling to restrain growth in money supply and inflation, the central bank said it would lift the proportion of deposits that commercial banks must keep in reserve by 0.5 percentage point to a record high of 13.5 percent.
South Korea's key KOSPI slid 3.1 percent, Taiwan shares fell 2.7 percent, and Hong Kong' Hang Seng Index dropped 3.4 percent and Singapore's Straits Times Index was off 2.7 percent.
Australia's benchmark S&P/ASX 200 index eased a mere 0.7 percent, thanks in part to a surge in Rio Tinto.
Takeover target Rio Tinto extended its rally on hopes that suitor BHP Billiton would have to lift its original $140 billion bid, which Rio had rejected as too low.
OIL, WALL STREET JITTERS
The fall in Asian markets followed declines on Wall Street, which slid on Friday led by technology stocks after Qualcomm Inc's disappointing outlook. The tech-heavy Nasdaq Composite Index dropped 2.5 percent and suffered its biggest weekly point loss since September 2001.
Japanese government bond futures vaulted to a 21-month peak after Wall Street's slide drove the Nikkei average to this year's low, raising doubts about how soon the Bank of Japan can raise interest rates.
Analysts said BOJ Governor Toshihiko Fukui was likely to repeat that the central bank will raise rates gradually at a news conference on Tuesday following a two-day policy meeting. The BOJ is widely seen keeping rates steady at 0.5 percent.
Investors think Fukui will still insist on rate normalization, said Kenro Kawano, an interest rate strategist at Credit Suisse.
NYMEX crude for December delivery fell as much as $1.08 to $95.24 a barrel and was trading at $95.31 by 0311 GMT.
Saudi Arabia, the world's top oil exporter, said on Sunday the exporter group would discuss an increase in oil output at an upcoming meeting, in a bid to cool record prices nearing $100 a barrel
Saudi Arabia's comments signal a change in the oil cartel's policy. Up to now, most in OPEC have insisted that the market is well supplied with crude and a further supply increase would do little to tame a rally driven by speculators, political tensions and a weak U.S. dollar.
The dollar was a bit higher against the euro at $1.4650 having pulled up from a record low against the euro of $1.4753 hit on EBS on Friday.
Gold eased, coming under pressure after a fall in oil and last week's challenge of a new record above $850 an ounce failed. Spot gold traded at $824.60/825.30 an ounce, down from $832.30/833.10 in New York on Friday.
(Additional reporting by Ian Chua, editing by Lincoln Feast)