Asian shares inched lower on Tuesday as caution reigned ahead of a potentially tense meeting between U.S. President Donald Trump and his Chinese counterpart Xi Jinping later this week.
The dollar lost ground after investors sold stocks overnight and looked to safe havens as political uncertainty overshadowed positive U.S. economic data and solid growth in global manufacturing.
MSCI's broadest index of Asia-Pacific shares outside Japan was fractionally lower.
Japan's Nikkei fell 0.4 percent as investors sought out the safe-haven yen and as automakers tumbled on weaker-than-expected U.S. sales.
Toshiba Corp, the worst performer on the index, slumped almost 9 percent after sources said it will meet creditor banks on Tuesday to ask them to accept as collateral shares in some of its businesses in exchange for not calling in their loans.
Australian shares slid 0.2 percent despite an expansion in the country's February trade surplus to more than double the previous month's as exports of gold and minerals rebounded, while imports dropped.
China, Hong Kong, Taiwan and India were closed for holidays.
Adding to market jitters was an attack by a suspected Islamic suicide bomber on a metro train in St. Petersburg, Russia, that killed 11 people and injured 45.
"Certainly a reaction had been seen towards the metro bomb at St Petersburg," Jingyi Pan, market strategist at IG in Singapore, wrote in a note.
The meeting between Trump and Xi will also "have due influence upon Asian markets and I would not be surprised if traders choose to stay on the side-lines to ride out these events."
Overnight, U.S. stock indexes closed in the red after Trump held out the possibility of using trade as a lever to secure Chinese cooperation against North Korea in an interview with the Financial Times on Sunday.
Last week, Trump tweeted that the highly anticipated meeting, which is also expected to cover differences over trade, North Korea and China's strategic ambitions in the South China Sea, "will be a very difficult one."
That has kept investors on edge, knocking riskier assets and forcing investors into safe assets such as the yen, gold and Treasuries.
Data showing U.S. construction spending grew 0.8 percent to $1.19 trillion, the highest since April 2006, failed to boost sentiment, while a deceleration in U.S. auto sales in March reinforced investors' unease.
Manufacturers across Europe and much of Asia had solid growth in May, making for a strong quarter overall, business surveys showed, but the rise of U.S. protectionism is keeping both investors and companies wary.
European stock markets hit a 16-month high on Monday but failed to hold on to the gains as risk aversion returned. The pan-European STOXX 600 index closed down 0.5 percent.
The 10-year U.S. Treasury yield fell to 2.3354. It touched a five-week low of 2.321 overnight.
"The dollar is feeling pressure against the yen from an interest rate spread point of view," said Shin Kadota, senior strategist at Barclays in Tokyo.
The dollar dropped 0.2 percent to 110.655 yen in its third straight session of losses.
The dollar index, which tracks the greenback against a basket of six trade-weighted peers, fell almost 0.1 percent to 100.48, although it touched a 2-1/2-week high in the previous session.
The euro was steady at $1.0667.
In commodities, crude failed to recover from overnight losses on a rebound in Libyan output and an increase in U.S. drilling rig capacity, both of which exacerbated concerns about a glut.
U.S. crude was little changed at $50.24 a barrel.
Global benchmark Brent was flat at $53.12.
Gold prices hit a one-week high before pulling back a little to trade almost 0.2 percent higher at $1,254.51 an ounce.