Asia stocks nervy

The still weak yen prompted investors to dump exporters such as Toyota Motor Co. and Canon Inc., both off more than 2 percent, driving Japan's Nikkei stock index down 1.3 percent, erasing all its 2007 gains.

"The money flow is slowing," said Hideyuki Suzuki, investment information manager at SBI Securities.

Wobbly global stock markets prompted investors to reduce their positions in commodities, including gold, which fell below $660 an ounce for the first time since February 21, while oil eased from $62, the highest close since December 22.

But the MSCI's index of Asian stocks outside Japan was up 0.2 percent, as China's composite share index, which helped spark the global rout on Tuesday with a near-9 percent dive, moved up 0.8 percent. Hong Kong added 0.9 percent.

Stronger-than-expected U.S. manufacturing figures helped the dollar recover slightly against the yen and euro.

The U.S. currency rose to 117.50 yen paring some losses after hitting 11-week lows at 116.96 yen, as investors offload carry trades in which they sold low-yielding currencies such as the yen to buy higher-yielding currencies and assets.

U.S. data from the Institute for Supply Management showed a broad recovery in factory activity last month, offering hope that the economy is not in as bad a shape as feared, helping the dollar's tentative recovery.

Traders said there was still a risk that more investors might need to cover their bets against the yen, putting more pressure on the dollar, euro and major currencies.

"The more the market hits new lows, the more unwinding is likely to come," said Takeshi Iba, head of the Tokyo FX department at Calyon.

The euro hovered near an 8-week low at $1.3170 after sliding to $1.3155 in the previous session. The euro rose to around 155.10 yen after dropping to 154.55 yen overnight.

MORE STABILITY NEEDED

Tokyo's broad TOPIX index was down 1.2 percent, with Sony sliding 3.6 percent on concerns that the stronger yen could eat into earnings.

Seoul shares were flat, with blue chips such as Kookmin Bank slightly weaker, while an easier won currency helped exporters such as Hyundai Motor Co.

"Foreign investors are pulling out of emerging markets. I don't think this is the start of a long-term trend, but they are likely to stay away from markets like Korea until global markets stabilize," said Kim Hak-kyun, an analyst at Korea Investment and Securities.

Singapore was off 0.25 percent and Taiwan was down 0.2 percent.

Shares on Wall Street ended well off their lows on Thursday thanks to the upbeat U.S. manufacturing report. The Dow Jones industrial average settled 0.28 percent lower, the Standard & Poor's 500 Index was off 0.26 percent and the tech-led Nasdaq lost 0.49 percent.

U.S. crude oil shed 24 cents to $61.76, after hitting $62 a barrel overnight on worries over supply in the United States due to refinery glitches and falling stocks.

Spot gold was trading around $660 an ounce, down from nearer $663 in New York on Thursday, but up from Friday's low of $657.90, the lowest since February 21.

Japanese government bond prices were steady after a series of economic reports did little to change expectations that the Bank of Japan will raise interest rates only slowly.