Growing fears that global economic turmoil is seeping into the United States kept pressure on the dollar Friday -- boosting oil but hitting Japanese stocks -- as investors bet the Federal Reserve will hold off hiking interest rates this year.
After a tumultuous start to the year fuelled by a slowdown from Asia to South America, the focus now turns to the US, the world's biggest economy and key driver of world growth.
The US has enjoyed reasonable results for the past few years in the face of a worldwide malaise, but a string of weak data out of Washington recently has led to speculation it is now in the firing line.
On Thursday, figures showed orders for manufactured goods fell again in December and jobless claims rose last week. That came after data pointed to a slowdown in factory activity, easing economic growth, a drop in consumer spending and weakness in the crucial services sector.
"Until now, the view on the US economy was that it was recovering, but the pace wasn't as fast as hoped. Now there's some concern in the market that it may actually be contracting," Juichi Wako, a senior strategist at Nomura Holdings, told Bloomberg News.
Eyes are now on the release later in the day of a jobs report with a weak reading likely to reinforce worries about the economy and possibly force the Fed to keep borrowing costs on hold.
"Expectations are growing by the day that the Fed will not hike again this year given the weaker growth picture and tightening financial conditions," Jason Wong, a currency strategist in Wellington at Bank of New Zealand Ltd., said in an email to clients. "The key release is US employment data."
- Toshiba at 36-year low -
With a rate hike looking less likely, the dollar has taken a hit this week, sinking well below 117 yen, from above 121 yen at the end of last week when the Bank of Japan said it would adopt a negative interest rate policy.
The euro also rallied, buying more than $1.12, up from levels just above $1.08 last Friday.
The weakened greenback has provided some support to oil prices as it makes the commodity cheaper for buyers using other currencies.
US benchmark West Texas Intermediate was down 0.4 percent at $31.61 in the afternoon and Brent was 0.4 percent down at $34.22.
However, the contracts are well up from levels below $30 seen at the end of last month. But analysts warn that with the ongoing problems of a supply glut, overproduction, weak demand and a global slowdown still in place, prices could still retreat.
Japanese stocks fell into the red as the stronger yen hit exporters. The Nikkei fell 1.3 percent, with Toshiba ending at a more than 36-year low after it widened its full-year loss forecast to an eye-watering $6.0 billion.
After the market closed, car giant Toyota -- which last month retained the title as world's biggest auto maker -- said net profit jumped almost 10 percent in April-December and raised its profit forecast for the full fiscal year.
On other markets, Sydney also ended down, losing 0.1 percent.
Hong Kong was up 0.6 percent as investors took their lead from a Wall Street advance while energy firms extended a recovery with the gains in oil. Shanghai closed 0.6 percent lower while Singapore jumped two percent, Manila 1.8 percent and Jakarta 2.4 percent.
In early European trade London gained 0.1 percent, Frankfurt fell 0.2 percent and Paris climbed 0.2 percent.
- Key figures around 0830 GMT -
Tokyo - Nikkei 225: DOWN 1.3 percent at 16,819.59 (close)
Hong Kong - Hang Seng: UP 0.6 percent at 19,288.17 (close)
Shanghai - composite: DOWN 0.6 percent at 2,763.49 (close)
London - FTSE 100: UP 0.1 percent at 5,903.5
Euro/dollar: DOWN at $1.1207 from $1.1215 on Thursday
Dollar/yen: DOWN at 116.72 yen from 116.74 yen
New York - Dow: UP 0.5 percent at 16,416.58 (close)