Asian stocks struggled on Wednesday, as 10-year US Treasuries surged at 16-year highs as surging oil prices drive inflation and set the scene for the Federal Reserve to forecast interest rates staying higher for longer.
Brent crude futures eased overnight from 10-month highs overnight, but at $94.26 a barrel are up 30 percent in three months thanks to Saudi Arabia and Russia vowing to extend output cuts.
Overnight data showed a larger-than-expected increase in Canadian inflation, lifting the loonie and triggering selling in the Treasury market.
Benchmark 10-year Treasury yields climbed to their highest since 2007 at 4.371 percent overnight and were last at 4.36 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.2 percent, as did Japan's Nikkei. The S&P 500 slipped 0.2 percent on the Nasdaq stock market yesterday.
Futures pricing indicates almost no chance of a Fed hike at 1800 GMT, but traders, who have started winding back bets on cuts in 2024 and will be closely focused on the US central bank's economic projections and chair Jerome Powell's news conference.
The yen has been in a holding pattern ahead of the Fed meeting, though the yen still faces pressure, which early on Wednesday prompted a riposte from Japan's top financial diplomat.
The dollar is down 11 percent on the dollar this year as expectations are firm for the US rate to stay high and Japanese rates to stay low. Late last week, the yen hit a 10-month trough of 147.95 to the dollar and traded at 147.80 early on Wednesday.
Benchmark 10-year Japanese government bonds remain hemmed around 0 percent, but at 0.72 percent have been creeping towards the Bank of Japan's adjusted tolerance for yields 1 percent either side of zero.
The euro remained stable at $1.0684. Commodity-exporters' currencies were firm, with the New Zealand dollar holding modest recent gains at $0.5940 after strong dairy price gains at an overnight auction.
On Wednesday, China left benchmark lending rates unchanged, keeping the yuan steady at 7.2946 per dollar.
The aussie remained stable at $0.6415, while sterling has halted its slide and held at $1.2390 ahead of British inflation data due at 0600 GMT where headline CPI is seen ticking up to 7 percent year-on-year.