Worries about the slowdown in Chinese growth kept the pressure on Asian financial markets Wednesday, with traders following their US and European counterparts to the sidelines, pushing most risk assets lower.
However, news that consumer inflation in China had eased in September while producer prices plunged fed hopes Beijing will launch another round of stimulus as leaders struggle to get a handle on the country's deepening economic crisis.
A recent rally across global equities and currency markets this month was brought to a halt Tuesday when China released figures showing imports plunged by more than a fifth in September while exports also declined.
And on Wednesday official figures showed inflation weakened last month from August, while the prices paid at factory gates -- a key gauge of demand in the economy -- remained unchanged at a six-year low.
"The cautionary element in the market is likely to continue," Chris Green, an Auckland-based strategist at First NZ Capital, told Bloomberg News.
"In terms of global growth, the risk is skewed towards the downside. A softer read on the Chinese inflation data reinforces the backdrop of deflationary pressures and softer growth profile globally. The Chinese economy is probably the largest risk that the global economy faces at this point."
Analysts have said the latest soft readings have raised hopes for another batch of monetary easing out of Beijing, following five interest rate cuts since November.
"China remains a source of market debate," said Evan Lucas of IG in Melbourne.
- 'White knight' -
"The bears see a hard-landing as inevitable, the bulls continue to see bright spots here and there, and have an unrelenting belief that the (People's Bank of China) will be the shining white knight riding in with a rate slashing sword to save the day."
On equities markets, dealers tracked losses on Wall Street and across Europe. Shanghai was 0.82 percent lower, Hong Kong lost 0.99 percent and Sydney -- where several firms that rely on Chinese trade are listed -- was 0.47 percent off.
Tokyo tumbled 1.83 percent with exporters hit by a stronger yen as investors, spooked by new growth fears, shifted into assets considered safe bets.
"The dollar surrendered some strength as fresh signs of a weakening world economy seemingly tossed a US rate hike further into the future," said Joe Manimbo of Western Union Business Solutions.
"The Fed is all but certain to stand pat on rates when it meets in two weeks."
Manimbo said the greenback fell after the Chinese trade data as well as news that British prices slid in September and investor sentiment in Germany slumped to its lowest level in a year.
The greenback was at 119.58 yen compared with 119.72 yen in New York Tuesday.
The dollar had been rallying for most of the year on expectations the Federal Reserve would raise interest rates before 2016.
However, central bank policy makers have turned dovish in recent weeks -- helping emerging markets currencies -- owing to turmoil on global markets caused by the China crisis.
But the US unit has picked up over the past two days as nervousness returns to trading floors, advancing against the Australian dollar, South Korean won, Indonesian rupiah and Thai baht.