Asian markets largely dipped Tuesday as holiday closures saw muted activity in Europe at the start of the week, with investors searching for trading leads.
Tokyo fell 1.2 percent after three days of gains as a solid yen failed to soothe exporters' concerns, with the currency trading at its highest level since late 2016.
But Hong Kong fared better, edging up 0.57 percent as traders returned to work after the Lunar New Year holiday, marking the Year of the Dog.
Monday's closures in the US and Canadian markets "crimped activity", said Stephen Innes, an analyst at OANDA.
"And adding to the void, there was scant data during European hours which severely nipped action as traders had few if any fundamental guideposts," Innes added.
In currency markets, the euro-dollar was trading in a narrow range while the yen slipped against the dollar and the euro in Asian trade, but still remained at a high level.
"Dealers are watching share prices in global markets and US interest rates in nervous trade, while awaiting the minutes" of the US Federal Reserve's policy meeting last month, due Wednesday, for fresh clues about the pace of rate hikes this year, Mizuho Securities said in a commentary.
"The positive move seen in the domestic equity market appears to have been the driver for the softer yen," Rodrigo Catril, senior strategist at National Australia Bank, said in a note to clients.
"That said, given the sharp decline in USD/JPY over the past week, (it) is not that surprising to see the currency stage a small rebound," he said.
A stronger yen is negative for Japanese exporters as it erodes their profits when repatriated.
Automakers dropped, with Toyota down 3.04 percent at 7,297 yen and Honda off 2.05 percent at 3,772 yen.
Elsewhere in Asia, Seoul fell 0.81 percent, while Manila lost 0.69 percent. Singapore dropped 0.53 percent and Sydney by 0.38 percent. Markets in mainland China remained shut for the Lunar New Year holiday.
- Oil rallies -
The subdued return to trading came after world markets were roiled in recent weeks by a degree of volatility not seen in years, fraying investor nerves.
In commodity trading, oil markets showed cautious optimism after starting the week on a positive note.
"Convincing signals from OPEC and their partners to extend production cuts continue to resonate with investors," analyst Innes said.
"Also, an escalation of Middle East tensions on the back of Israeli Prime Minister Benjamin Netanyahu beating the war drums by suggesting that Israel could act against Iran alone has nudged prices higher."
In a speech in Munich on Sunday, Netanyahu warned Tehran over aggression by Iran and its "proxies" in Syria, saying: "Do not test Israel's resolve."
Tensions between the arch enemies have mounted after clashes involving Syrian forces this month, sparked by Israel's downing of what it called an Iranian drone sent from Syria.
"Predictably this warmongering has put the region on a state of readiness fearing a head to head incident and boosted oil prices due to the fear of sizable supply disruptions," Innes said.
- Key figures around 0300 GMT -
Tokyo - Nikkei 225: DOWN 1.2 percent at 21,884.21 (break)
Hong Kong - Hang Seng: UP 0.57 percent at 31,291.84
Shanghai - Composite: Closed for a public holiday
Euro/dollar: DOWN at $1.2383 from $1.2395 at 1640 GMT
Pound/dollar: DOWN at $1.3974 from $1.3991
Dollar/yen: UP at 106.75 yen from 106.57 yen
Oil - Brent North Sea: DOWN 27 cents at $ 65.40 per barrel
Oil - West Texas Intermediate: UP 48 cents at $62.16
New York - Closed for a public holiday
London - FTSE 100: DOWN 0.6 percent at 7,247,66 points (close)