An uptick in US economic growth increased expectations the Federal Reserve will hike US interest rates by the end of the year, providing more support to the dollar Monday but concerns over China dragged on stock markets.
Dealers are keeping a close eye on the release of key US data this week, including employment, that will provide a better idea of when the central bank will announce its lift-off.
Thursday will also see the Bank of Japan release its Tankan survey of business confidence, with analysts forecasting a dip in reaction to China's sharp growth slowdown, which has rattled global markets.
St Louis Fed chief James Bullard on Friday raised the prospect of a lift in US borrowing costs on Friday when he said he would "like to get going". While he said he was not sure if a rise would come in October, his comments reinforced the view that monetary policy would be tightened before 2016.
They also come after Fed boss Janet Yellen said Thursday she expects a hike by the year's end, pointing to recent strong data.
On Friday the Commerce Department said the US economy grew 3.9 percent in April-June, up from the 3.7 percent originally stated thanks to a boost in investment and consumer spending.
Attention will now turn to next Friday's non-farm payrolls results, with a strong figure likely to reinforce calls for an early rate move.
On forex markets the dollar rose against most emerging currencies. The Malaysian ringgit lost 0.18 percent, Taiwan's dollar shed 0.24 percent, the Thai baht was 0.17 percent lower and the Indian rupee sank 0.26 percent. Indonesia's ringgit eased 0.08 percent and is struggling at 17-year lows versus the greenback.
Koji Fukaya, the chief executive officer at FPG in Tokyo, told Bloomberg News: "US data this week is important and even if results are mixed, it won’t affect the baseline as the Fed made clear its intention to raise rates this year. The dollar is set to gain broadly."
- 'Super-sensitive' -
The euro also weakened, to $1.1186 from $1.1202 in New York.
However, stock markets were mostly in the red Monday on the prospect of higher US borrowing rates -- which would hurt investment in the region -- and fears over China's long-running woes, which have sent world markets tumbling for weeks.
On Wall Street the Dow ended slightly higher but the S&P 500 and Nasdaq retreated.
"Everyone is super-sensitive to China at the moment," Chris Weston, chief market strategist at IG, told Bloomberg TV.
In Asia, Shanghai fell 0.91 percent, Singapore lost 1.54 percent and Tokyo was down 1.14 percent by lunch, while there were also losses in Jakarta and Manila.
Hong Kong, Seoul and Taipei were closed for public holidays.
Chinese President Xi Jinping on Friday sought to shore up confidence in the world's number two economy, saying he was confident it would post "healthy" growth in the future.
He told a joint press conference with US President Barack Obama after White House talks that China had moved from "speed-based growth to quality-based growth".
Chinese authorities are trying to rebalance the economy -- which accounts for one out of every eight dollars of worldwide GDP -- from one reliant on exports and heavy government investment in infrastructure to one where domestic consumption is the main driver.
But alarm bells have been rung over how rapidly the economy is slowing, and whether the so-called new one is expanding fast enough to take up the slack.
But Xi said: "We call this the new normal of the Chinese economy and I'm confident going forward China will... provide a healthy growth that strengthens confidence."