Asian markets tumbled on Tuesday as news that US lawmakers had voted in favour of a plan to avoid default was overshadowed by fears about the global economy and a possible American credit rating downgrade.In Tokyo, expectations that officials could soon step into the currency markets were raised when Japan's finance minister said the yen was "strongly overvalued" after the unit approached its record high against the dollar in New York trade a day earlier.Tokyo shed 1.21 percent, or 120.42 points, to 9,844.59 and Seoul slumped 2.35 percent, or 51.04 points, to 2,121.27.Sydney ended 1.43 percent, or 64.2 points, off at 4,433.6.Shanghai dived 1.88 percent in the afternoon while Hong Kong fell 0.78 percent.
The losses came a day after a rally on news that an eleventh-hour deal had been struck between the White House and party leaders to raise the country's debt ceiling and avoid a catastrophic default on US sovereign debt.On Monday the House of Representatives voted in favour of the deal and it must now go to the Democrat-led Senate, where it is also expected to pass.However, despite the news -- which ended months of bickering -- dealers turned their attention to the possibility that the US AAA credit rating could be downgraded for the first time ever.Such a move would push up US interest rates, making debt payments more expensive and hitting the already spluttering US economy, still grappling with historically high unemployment of 9.2 percent.Adding to traders' woes was a raft of weak figures from the United States and other major economies.Earlier Monday the US said manufacturing slowed to a near standstill in July, days after it announced the economy grew only 1.3 percent in the second quarter, after 0.4 percent in the first -- the weakest growth since it exited recession two years ago.The imminent end to the US debt saga "lifts an overhang on global markets but we think deteriorating growth outlook is the bigger overhang," ING Financial said in a note to clients, according to Dow Jones Newswires.China, an economy on which many other nations rely to drive growth, also slowed abruptly -- with one survey suggesting contraction -- while there was similar bad news in Australia, Taiwan and India.The poor economic figures hit Wall Street, which closed before the debt vote. The Dow shed 0.09 percent, the S&P 500 dropped 0.41 percent and the Nasdaq dropped 0.43 percent.
Eyes are also on the key release Friday of US jobs figures, which will provide another snapshot of the state of the economy.On currency markets the dollar fell briefly to 76.29 yen in New York on Monday -- near its post-World War II low of 76.25 yen, reached on March 17 in the wake of the Japanese earthquake and tsunami. It ended in New York at 77.16 yen.The yen's surge then prompted a joint intervention by Japan and other members of the Group of Seven.The greenback firmed in Tokyo and was at 77.40 yen in the afternoon, helped by the US vote.However, Japanese authorities remain ready to step in at any point, a person familiar with the country's currency policy affairs told Dow Jones Newswires on Tuesday."Japan can conduct intervention at any time," the source told the wire.But the source declined to say how close the authorities were to taking action.The euro fell to $1.4219 from $1.4248, and to 110.39 yen from 109.98 yen.New York's main contract, light sweet crude for September delivery, slipped 27 cents to $94.62 a barrel in the afternoon.Brent North Sea crude for delivery in September fell 37 cents to $116.44.Gold opened in Hong Kong at $1,619.00-$1,620.00 an ounce, up from Monday's finish of $1,615.00-$1,616.00.