Asian shares edged higher on Friday on firm U.S. data, but a two-notch downgrade of Spain's credit rating capped gains, while fresh easing measures by the Bank of Japan briefly pushed Tokyo stocks up over 1 percent and the dollar above 81 yen.
European shares were likely to fall, with financial spreadbetters predicting that major European markets would open as much as down 0.5 percent. U.S. stock futures were down 0.5 percent.
Japan's central bank moved as expected to help fight deep deflation, sparking a jump in the Nikkei stock average which helped temporarily drag the broader Asian stock higher.
MSCI's broadest index of Asia-Pacific shares outside Japan last stood up 0.2 percent, set for a weekly drop of 0.1 percent. The technology sector and Korean shares outperformed, while Tokyo shares ended down 0.4 percent.
Seoul shares rose on the back of a record $5.15 billion first-quarter profit by Samsung Electronics, which boosted its shares by more than 3 percent to an all-time intraday high of 1.383 million won.
The BOJ boosted bond buying, extended the maturity of bonds it purchases and increased its buying of stock ETFs, but it also cut the amount for a pool of funds set aside for fixed-rate market operations. .
"The overall assessment is that while it is positive that the BOJ acted today, what they did today is not sufficient for the BOJ to recover its long lost credibility as a deflation fighter," said Takuji Okubo, chief Japan economist at Societe Generale in Tokyo.
A knee-jerk initial reaction in the currency market reflected this view, as the yen first firmed to 80.40 yen , then fell against the dollar to 81.35 yen. Th e yen last stood at 80.87.
After the BOJ decision, emerging Asian currencies hit session highs against the yen as investors are expected to use the cheap Japanese currency to buy higher-yielding units in developing markets.
The euro was down 0.2 percent at $1.3186, pressured by the S&P cutting Spanish ratings by two notches to BBB-plus due to its deteriorating public finances.
The currency had climbed to a three-week peak near $1.3264 on Thursday. The dollar index measured against a basket of key currencies inched up 0.3 percent after hitting a 3-1/2 week low on Thursday.
"The price action reflects strong market nervousness over the European problem, and that investors have yet to take on risk," said Junya Tanase, chief foreign exchange strategist at JPMorgan Bank in Tokyo.
If worries over the European situation intensified, that could also offset yen-selling pressures from the BOJ's further monetary stimulus, he added.
US DATA REASSURES
Thursday's data showing U.S. contracts to purchase previously owned homes stood near a two-year high in March added to economic optimism already spreading following solid earnings and the Federal Reserve's earlier pledge to keep accommodative monetary policy as long as needed. Commodity prices had ended broadly higher on the day on U.S. stimulus hopes.
But copper and oil retreated on Friday as the dollar firmed.
Copper hovered near $8,310 a tonne as renewed worries about the debt-laden euro zone trimmed appetite for riskier assets, while U.S. crude fell 0.5 percent to$104.01 a barrel and Brent fell 0.4 percent at $119.42.
Spanish debt downgrade sapped sentiment in Asian credit markets, with the spread on the iTraxx Asia ex-Japan investment-grade index widening by 4 basis points.
Fears about refinancing ability by some of the deeply indebted euro zone countries prompted safe-haven buying in U.S. Treasuries, sending the 10-year yield down to 1.89 percent from 1.95 percent in late U.S. trade.
GLOBAL LIQUIDITY
Currencies with higher volatility but with potential for more returns were likely to remain vulnerable, even with emerging economies more likely than developed economies to push for additional central bank liquidity, Morgan Stanley said in a research.
While the Fed kept the door open for further easing, it depends on the economic environment, and the European Central Bank is resisting taking a bigger role in suppressing rising yields on peripheral euro zone sovereigns, giving no sign for further long-term refinancing operations as of now.
"EM (emerging market) is normally a destination for investment during global expansion and risk positive environments, not a funding source for investment elsewhere. This suggests that any liquidity generated in EM is likely to stay in local markets," which is not necessarily supportive for global asset markets, it said.
