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The dollar and US bond yields rose on Thursday after President Donald Trump proposed the biggest US tax overhaul in three decades.
The dollar’s strength pressured many emerging market currencies and bonds, helping drag down MSCI’s broadest index of Asia-Pacific shares outside Japan 0.4 per cent to one-month lows.
South Korean 10-year yields hit a 2-year high, according to Reuters.
In contrast, Japan's Nikkei .N225 rose 0.55 per cent, taking cues from gains on Wall Street, where the Dow Jones Industrial Average rose 0.25 per cent while the S&P 500 gained 0.41 per cent.
The euro EUR= hit a six-week low of $1.1717 on Wednesday as the dollar broadly gained, and last traded at $1.1722, having shed 1.9 per cent so far this week.
The dollar shot up to a 2-1/2-month high of 113.26 yen JPY= the previous day before stepping back to 113.08 yen Thursday.
The Canadian dollar CAD=D4 extended its losses, suffering its biggest drop in eight months on Wednesday.
The dollar strengthened against many emerging market currencies while gold XAU= hit a one-month low of $1,281.5 per ounce.
US bond yields jumped with the yield on two-year notes US2YT=RR rising to a nine-year high of 1.49 per cent in anticipation of a rate rise in December.
Comments from Fed Chair Janet Yellen that the Fed needs to continue with gradual rate hikes have cemented expectations for policy tightening by year-end.