Asian markets mostly fell and the euro suffered a sell-off on Friday after the European Central Bank told Cyprus it would cut off funding to its banks if it did not agree a new bailout deal soon.
Regional markets followed losses in Europe and on Wall Street as Nicosia struggles to find new ways to raise cash to qualify for bailout funds, after its plan to tax savings was overwhelmingly rejected on Tuesday.
Tokyo tumbled 2.35 percent, or 297.16 points, to 12,338.53, while Seoul fell 0.11 percent, or 2.11 points, to 1,948.71 and Hong Kong fell 0.50 percent, or 110.58 points, to 22,225.30.
But Sydney rose 0.16 percent, or 7.9 points, to 4,967.3, although it is down three percent for the week, while Shanghai rose 0.17 percent, or 4.04 points, to 2,328.28.
Cypriot politicians have until Monday to approve a "Plan B" bailout deal with the European Union and International Monetary Fund or face being choked from ECB funds, which would likely cause the island's banks to collapse.
Adding to pressure, an EU source said that unless Nicosia pushed a workable plan through parliament and restructured its banking sector by Tuesday it risked expulsion from the eurozone.
Global markets have this week largely been driven by the crisis in Cyprus after the government at the weekend unveiled a plan to tax deposits up to 10 percent as part of a deal to qualify for a EU/IMF $13 billion bailout.
The proposal met global consternation, with markets diving. Despite a revised plan that eased the burden on poorer people, lawmakers threw it out, leaving the island desperate for cash to pay its huge debts.
However, Macquarie Private Wealth division director Martin Lakos told Dow Jones Newswires: "Cyprus has reminded investors of European risks, but I don't think Cyprus itself is a big risk for the market.
"The market was due for a pullback despite pretty good US economic data in recent months, but it's still very much a buy-the-dips environment."
The events in Cyprus have, however, halted a months-long rally in the euro and the dollar against the yen.
In Tokyo on Friday the dollar fetched 94.40 yen and the euro 121.90 yen, compared with 95.01 yen and 122.58 yen in New York late on Thursday. That compares with 95.84 yen and 123.90 yen Thursday in Asia.
The euro was also at $1.2908, compared with $1.2902 in New York. The single currency was at $1.2923 earlier Thursday.
Adding to pessimism in Europe was data showing further weakness in manufacturing.
The eurozone Purchasing Managers' Index (PMI) published by London-based Markit showed the German economy was starting to be affected by the problems in the rest of the region while the French slowdown is accelerating.
Overall the eurozone PMI, a leading indicator of growth, fell to a four-month low of 46.5 points in March against 47.9 in February.
A figure above 50 indicates growth while anything below points to contraction.
On Wall Street the Dow fell 0.62 percent, the S&P 500 dropped 0.83 percent and the Nasdaq gave up 0.97 percent.
Oil prices rose, with New York's main contract, light sweet crude for delivery in May down nine cents to $92.36 a barrel in the afternoon while Brent North Sea crude for May lost 47 cents to $107.00.
Gold was at $1,612.00 an ounce at 0820 GMT compared with $1,608.40 late on Thursday.
In other markets:
-- Taipei rose 0.20 percent, or 15.62 points, to 7,796.22.
Taiwan Semiconductor Manufacturing Co. was 0.71 percent lower at Tw$98.0 while leading smartphone maker HTC rose 0.42 percent to Tw$240.0.
-- Manila closed 0.71 percent higher, adding 45.73 points to 6,518.71.
Ayala Corp. rose 0.18 percent to 551 pesos and BDO Unibank advanced 4.02 percent to 87.90 pesos, but Philippine Long Distance Telephone fell 0.64 percent to 2,792 pesos.
-- Wellington was virtually unchanged, edging up 0.38 points to 4,342.89.
Mainfreight shed 2.7 percent to NZ$10.90, while Auckland Airport was up 1.4 percent at NZ$2.82.