The U.S. dollar gained 1.2 percent against the yen. Japanese Finance Minister Taro Aso said Tokyo is ready to intervene if yen moves are volatile enough to hurt the country's trade and economy. The Japanese currency last week hit a 1-1/2 year high against the greenback.
SYDNEY: Uncertainty gripped Asian markets on Tuesday as investors braced for a potentially pivotal U.S. presidential debate by shunning stocks while favouring safe haven bonds and the yen.
MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.3 percent in early trade, while South Korea fell 0.6 percent.
Japan's Nikkei dropped 1 percent as a higher yen threatened exporter sales and profits.
The debate between Democrat Hillary Clinton and Republican Donald Trump starts at 0100 GMT and could have a big impact with the race seemingly so close.
Markets have tended to see Clinton as the candidate of the status quo, while few are sure what a Trump presidency might mean for U.S. foreign policy, trade and the domestic economy.
On Wall Street, the Dow fell 0.91 percent, while the S&P 500 lost 0.86 percent and the Nasdaq 0.91 percent. The pan-European STOXX 600 index also fell 1.6 percent to a one-week low.
Big banks led the declines after Deutsche Bank slid to a record low on concerns it might need to raise more capital to meet $14 billion in U.S. fines.
"There's a thing called Trump thermometer," said David Bloom, London-based global head of forex strategy at HSBC.
"If you want to know who won the presidential election, don't go to Twitter or Facebook. Just look at the dollar/Mexico peso."
The peso has hit record lows in recent days on concerns a Trump victory would threaten Mexico's exports to the United States, its single biggest market.
"If Clinton wins, you will get a big rally in the peso, and reasonable rallies in emerging markets," he said, while if Trump gets the nod it should benefit safe-havens such as the yen, the euro and the Swiss franc.
The dollar was already down at 100.34 yen and threatening a psychological bulwark at 100.00. The euro was firm at $1.1252.
Other safe havens include U.S. Treasuries which caught a bid ahead of the debate and pushed longer-term yields to three-week lows.
In commodity markets, oil steadied after bouncing 3 percent on Monday as the world's largest producers gathered in Algeria to discuss ways to tackle a crude glut that has battered prices for two years now.
Brent crude eased back 29 cents to $47.06 a barrel, while U.S. crude dipped 27 cents to $45.66 per barrel. - Reuters
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