SYDNEY Asian shares and the dollar started the new quarter on a downbeat note on Friday as caution ruled ahead of surveys on global manufacturing and the latest reading on U.S. jobs.
Analysts anticipate little in the way of cheer on industry across Asia, with the Bank of Japan's Tankan already finding a darkening mood among major Japanese manufacturers.
Not helping sentiment was Standard & Poor's decision late on Thursday to cut China's credit outlook to negative, saying the government's reform agenda is on track but likely to proceed more slowly than expected.
While U.S. payrolls were expected to show a healthy increase of 205,000, any further strength might revive the risk of higher U.S. interest rates and so weigh on equities.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS duly slipped 0.5 percent, while the Nikkei .N225 lost 1.2 percent.
The Australian market lost 1 percent as concerns about bad debts bedevilled its banking sector.
It was a muted end to a wild quarter that saw stocks plunge on global growth fears only to rebound as major central banks took ever more aggressive stimulus steps.
The latest twist was this week's surprisingly dovish steer on policy from Federal Reserve Chair Janet Yellen which saw investors further scale back expectations for how far and fast interest rates would rise in coming years.
Fed fund futures <0#FF:> currently have one quarter-point hike priced in by December, while yields on two-year Treasury paper US2YT=RR were down at one-month lows.
Indeed, U.S. Treasuries enjoyed their best quarter in 4-1/2 years as yields on 10-year notes US10YT=RR dropped a steep 50 basis points in the three months to March.
The dollar's reaction has been just as large but in a bearish direction, as the currency suffered its largest quarterly percentage loss in more than five years.
The dollar index .DXY, which measures it against a basket of major currencies, hit its lowest since mid-October and was last stuck at 94.566.
The euro was firm at $1.1386 EUR= after reaching $1.1411, the first visit above $1.1400 in 5-1/2 months.
The dollar was last at 112.33 yen JPY=, having been as high as 113.80 early in the week.
The weaker dollar has been something of a reprieve for oil, which boasted its best quarter since mid-2015 with a gain of 10 percent.
Worries about over supply still remain, however, and U.S. crude CLc1 was off 14 cents at $38.20 a barrel on Friday. Brent LCOc1 inched down 17 cents to $40.16. [O/R]
Gold XAU= was steady at $1,232.60 an ounce, after notching up its biggest quarterly gain in nearly 30 years.
(Reporting by Wayne Cole; Editing by Kim Coghill)
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