Asian shares slumped on Thursday, dragged lower by heightened concerns about the health of China's economy after unexpectedly bearish minutes from the US Federal Reserve.

The dollar tumbled as the Fed dampened expectations for a rate rise in September and outlined its fears about the global economy, sending oil prices to a fresh low.

Tokyo lost 0.47 percent as the yen strengthened against the greenback, adding to worries about Japan's slowing exports. Sydney fell 1.15 percent and Seoul dipped 0.74 percent.

Shanghai lost 1.18 percent in early trading after a volatile session the previous day, while Hong Kong continued its downward trend, falling 1.38 percent.

Dealers said markets remained clouded by uncertainties over China's economy after the shock devaluation of the yuan last week added to fears it is slowing more than thought.

"While the Fed is looking less likely to move in September, everybody is really worried that China is slowing down faster than what official figures are telling you," Evan Lucas, at IG Markets in Melbourne, told Bloomberg News.

"That's putting pressure on industrial metals and emerging markets."

The dollar lost more than one cent against the euro after the Fed minutes said that while conditions for a rate increase were "approaching" they had not yet arrived.

In Tokyo, the dollar was quoted at 123.91 yen, from 123.89 yen in New York late Wednesday.

The euro rose to $1.1138 and 138.01 yen from $1.1121 and 137.78 yen.

Minutes from the Fed, which met before China's surprise devaluation of the yuan last week, also highlighted concerns about the global economy and particularly China, saying "a material slowdown in Chinese economic activity could pose risks to the US economic outlook".

Fears about Asia's largest economy, the world's top importer of energy products, and data showing a rise in US petroleum inventories pushed oil to a fresh six-and-a-half year low in New York.

Oil stocks rose 2.6 million barrels in the week ending August 14, according to the US Department of Energy, which also showed a 300,000 barrel rise at the Cushing, Oklahoma trading hub.

In Asia, crude extended losses to trade a hair's breadth away from the psychologically important $40 a barrel mark -- a level not seen since the height of the financial crisis in 2009.

West Texas Intermediate for September delivery was down 32 cents to $40.48 a barrel while Brent crude for October fell 25 cents to $46.91.

The drop weighed on energy companies in Asia, with Petrochina among one the major losers in Shanghai, dropping 2.26 percent, while CNOOC lost 1.28 percent.

"The Fed is lacking decisive reasons to raise rates," Mitsushige Akino, an executive at Ichiyoshi Asset Management, told Bloomberg News.

"Concerns about the global economy are a burden and cheaper oil increases concerns about global growth."

Safe haven gold got a boost, trading at $1,134.90 compared to $1,122.65 late Wednesday.

Shares in Qantas rose 0.40 percent after the Australian flag carrier reported a Aus$557 million (US$409 million) annual net profit from a Aus$2.84 billion loss a year ago, after an aggressive cost-cutting programme.