Asian shares wilt, Fed anxiety eclipses China optimism

"If the ISM report is better than expected, it could add to revived tapering expectations, and U.S. yields and the dollar could go up and stocks could go down," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.Data on Thursday showed the pace of business activity in the U.S. Midwest jumped more than expected in October, while jobless claims decline in the latest week,alligator shear soothing some worries about sluggish fourth-quarter growth after last month's federal government shutdown.Still, not all investors or economists were convinced that the latest U.S. data heralded a shift in monetary policy expectations.

"The existence of noise in the October data will likely make it difficult for the Fed to gather enough evidence to start tapering in December," strategists at Barclays wrote in a note to clients, adding that they still to expect the central bank to begin reducing its current $85 billion monthly bond purchases in March 2014.The U.S. data pressured emerging market currencies, with the Indian rupee and Indonesian rupiah leading slides.The euro remained under pressure after plunging in the previous session as euro-zone inflation dropped to its lowest rate in nearly four years,alligator shear sharpening expectations that the European Central Bank, in contrast to the Fed, will further ease its monetary policy.

The single currency dropped about 0.2 percent to $1.3555, moving away from a two-year peak of $1.3833 set one week ago. On Thursday, it suffered its biggest one-day fall against the greenback in six months, tumbling 1.1 percent.Data on Thursday showed euro-area inflation slowed to a four-year low of 0.7 percent last month, far below the ECB's target of just under 2 percent. Other data showed unemployment held at record highs in September.The dollar index .DXY,skin analyzer which measures the greenback against six major currencies, was on track for a sixth session of gains, rising about 0.1 percent to 80.305 after touching a two-week peak of 80.418 and pulling further away from a nine-month trough of 78.998 hit one week ago.Against the Japanese currency, the dollar was about 0.4 percent lower on the day at 97.91 yen.In commodities trading, gold steadied but was still trading close to its lowest in nearly two weeks, hurt by sharp losses in the previous session from month-end profit-taking, the strong U.S. economic data and the higher dollar.

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