Asian stock markets were becalmed on Wednesday due to a surge in oil and Chinese factory prices, which added to worries that a hot US inflation reading could lead to pressure on policymakers to lift interest rates.
US crude futures rose 1 percent to a two-week high of US $84.97 a barrel in early trade, while Brent futures made a one-week top of $85.35.
Factory gate prices in China have soared 13.5 percent year-on-year since October, according to data released by the data, beating forecasts and warnings of pressure on supply chains to global consumers.
The Nasdaq reported its first fall in a dozen sessions, with the broadest index of Asia-Pacific shares outside Japan and Japan's Nikkei each dropping 0.2 percent in and Overnight on Wall Street.
Consumer prices are expected to go up 5.8 percent year-on-year and even dovish Federal Reserve officials Neel Kashkari and Mary Daly have conceded that it is running hotter for longer than expected, according to US data due at 1330 GMT.
I would imagine that now there is no doubt left within the Fed that risks around inflation are much more elevated than previously assumed, according to NatWest Markets strategists.
Longer-dated bonds had rallied on Tuesday, flattening the Treasury yield curve, as investors seem to be wagering on hikes in the next year or so, which will reduce growth and inflation in the years to come.
A firm CPI read can add a bit more fuel to the flattening, according to NatWest analysts. I would argue that a weak CPI number wouldn't be enough to make markets think that the Fed will hold back. The benchmark 10 year yield rose by more than 2 basis points to 1.4626 percent in Asia hours after it had touched a six-week low of 1.4150 percent overnight.
The yen was a one month high but traders favored safe havens on Tuesday and lifted the yen to a one-month high.
The Japanese currency held there on Wednesday at 112.84 per dollar and risk-sensitive currencies such as the Australian dollar were under pressure, with the Aussie testing support at its 50 day moving average of $0.7374.
Chris Weston, head of research at broker Pepperstone in Melbourne said the dollar will be sensitive to moves in the 2 -- 5 year part of the US Treasury curve.
He said that he thinks we need to see a monthly US CPI print of 0.8 percent to see the dollar index break out of the top of the range of 94.50. The index was last at 93.997.
As a credit crunch seems to be spreading through the giant property industry, the economic slowdown in China is nagging on investors' minds.
Bonds in the sector had suffered a pounding on Tuesday, with the sell-off dragging in even investment-grade debts.
The market is driven by fear rather than rationale, according to analysts at J.P. Morgan. Valuations have factored in the worst case scenario. A survey in Japan shows that manufacturers' business confidence fell to a new seven-month low and Tesla stock, a bit of a gauge of retail investors' sentiment is turning wobbly.
The carmaker, which has been the poster-stock of the thumping rally from pandemic lows, suffered its sharpest share price fall in 14 months on Tuesday as traders brace for a possible sale from Elon Musk.
Gold andBitcoin are the main beneficiaries of the market turbulence, with gold up 3.5 percent in a week to $1,829 an ounce and bitcoins hovering at $67,267 after hitting a record peak of $68,564 a day ago.