Overnight, the dollar slumped against a basket of major currencies on Tuesday, after reports surfaced that President Donald Trump shared sensitive information with Russian Federation at a meeting last week.
However, against the yen, the dollar has managed to retain nearly 50% of its post-election gains even after yesterday's 2% drop that took the greenback to a 3-week low below 111 yen. "But that seems to have changed", said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.
"So part of the correction is welcome because from a valuation standpoint, the USA equity market was in bubble territory", he said. "Because there is a little more political intrigue, (the rebound) may be hard to sustain".
The allegations surrounding Trump have not only thrown doubt over the future of the pro-growth policies he promised, but they have raised the possibility he could end up leaving the White House prematurely.
Trump, barely four months into his four-year term, said a special counsel's probe would show there was "no collusion" between his campaign and a foreign power.
US stocks were poised for a lower opening with Dow futures and the broader S&P 500 futures down 0.4 percent.
Only five of the 20 most active stocks ended in the green, led by Robinsons Retail Holdings Inc. which rose 1.9 percent to P83.65 and Bloomberry Resorts Corp. which gained 1.6 percent to P9.75. In Hong Kong, the broader market .hsi rose to its highest level since June 2015 on the back of extended buying into Chinese lenders and market heavyweight Tencent before declining 0.3 percent. Australia will also update on its wage price index for the first quarter with a gain of 0.5% seen quarter on quarter and 1.9% year on year.
Treasury yields were barely changed after a sharp drop on Wednesday.
A man looks at an electronic stock indicator of a securities firm in Tokyo, Wednesday, May 17, 2017. The tumult at the White House prompted currency traders to ditch the dollar to favour a broad range of currencies, most notably against the yen, to which investors often turn as a safe haven when there are problems in the United States. "That's the conversation we'll be having over the next day or two", he said, noting that he had cut back on "short" positions in safe-haven fixed income assets and the Japanese yen in recent weeks.
Asian stocks fell sharply after Wall Street suffered its worst day in over eight months overnight and Europe's main bourses dropped between 0.8 and 1.3 per cent as the selling momentum built again.
"There is a very high level of uncertainty oozing from the markets but one thing that is crystal clear, investors now believe that at a minimum the rising USA political entropy will jeopardise the White House policy agenda, and at the extreme, a Trump impeachment will lead to a flat out market collapse", said Oanda senior trader Stephen Innes.
The number of Americans applying for jobless benefits fell to a 28-year low and the Philly Fed's business index came in at double economists' expectations.
The euro was slightly lower, with EUR/USD slipping 0.25% to 1.1129 after rising to six-month peaks of 1.1172 earlier.
In Australia, the nation's currency rose to its highest level against the USA dollar since May 4 after an unexpected fall in Australia's unemployment rate in April.
Copper lost 0.52 percent to $5,581.00 a tonne.