Stocks edged lower throughout Asia following the lead of US markets while the dollar found support on suggestions Japan's central bank might act to ease monetary policy and push down the yen.
Currency markets also remained anxious about the prospects for new Japanese intervention and gold held near record highs.
US and European stock markets dipped as investors grew nervous after four weeks of gains and increasingly wary of European debt challenges, particularly those facing Ireland and Portugal.
The Wall Street Journal reported that Federal Reserve officials were considering a more open-ended smaller-scale bond buying programme than was the case in 2009. Traders said that prompted a dip in US treasuries and could offer the dollar some support.
Japan's Nikkei average fell 0.6 per cent, dropping as the deadline passed for investors to receive dividends on Tokyo stocks for the financial half year.
The yen hovered for a time near its highest level since Tokyo's heavy intervention two weeks ago to sell the currency and depress it.
But sources said the Bank of Japan was considering whether to ease monetary policy further though it could delay action pending a consensus on how to keep economic recovery on track.
Talk of easing was having an effect as was the constant possibility of intervention.
"The market consensus is now that there won't be endless yen strengthening, that if the dollar falls below 84 yen authorities are likely to intervene," said Kenichi Hirano, operating officer at Tachibana Securities.
Korean stocks dipped 0.31 per cent, while Australian stocks were virtually unchanged.
Despite this month's gains, Tokyo stocks rose only some 1.6 per cent this quarter, lagging other major stock markets. The S&P 500 has gained more than 10 per cent this quarter, while South Korean shares have risen some 9.3 per cent.
Dollar climbs back
The dollar was trading at 84.20 yen, little changed from the New York close but up from levels around 84.11 - its weakest point since the intervention.
The dollar index hit a seven-month trough of 79.19 on Monday, but climbed back in early Asia trade.
The Australian dollar was near two-year highs at 96.01 US cents, while the euro stood at $1.3448, away from Monday's peak of $1.3507 following Moody's decision to cut its ratings on some lower-grade debt of Ireland's Anglo Irish Bank.
The downgrade rattled markets, further jolted by the main opposition party's pledge to seek an early election. The rising cost of rescuing the bank, nationalised during the banking crisis in 2009, has heaped pressure on Ireland's already strained state finances.
Gold slipped after hitting a lifetime high at $US1300 an ounce in the previous session as a rebound in the dollar prompted speculators to lock in gains. US gold futures for December delivery dropped $4.1 an ounce to $US1294.5 an ounce.
Although lower prices could stir up purchases from jewellers, gold's failure to stay above Monday's peak could spur more selling from investors. South Korean bonds reflected the upward trend and were poised for a third straight day of rises linked to doubts over worries on Irish debt.
Investors on Monday snapped up US Treasury debt, driven by their desire for safer investments and healthy demand at an auction of new two-year government debt in the afternoon.
On Wall Street, the major US stock indexes declined in spite of a flurry of corporate mergers and acquisitions.
Crude fell towards $76 ahead of US reports expected to show fuel stockpiles rose in the world's top oil-consuming nation last week.
Reuters