Trading in Asia was expected to be more subdued than usual, with China closed for National Day and investors warily monitoring developments in Hong Kong's pro-democracy unrest, as thousands of protesters stepped up pressure on the city's pro-Beijing government.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.4 per cent, while Japan's Nikkei stock average fell 0.2 per cent. Japan's benchmark rose 4.9 per cent in September, the biggest monthly rise since last November.
The Bank of Japan's closely watched tankan survey of business sentiment released before the market opened showed big manufacturers' confidence improved slightly in the latest quarter, but service-sector sentiment worsened, adding to evidence that a sales tax hike continues to weigh on the economy.
The dollar index, which tracks the greenback against a basket of rival currencies, touched a four-year high of 86.218, and last stood at 85.939.
The euro skidded as low as $1.2571 on Tuesday after data showed cooling euro zone inflation, the culmination of a dismal month in which the currency slipped 3.82 per cent - its biggest decline in over two years. It was last steady on the day at $1.2629.
"The EUR/USD gapped lower by a big figure, falling toward 1.2570, before finding support and partially rebounding to 1.2630 this morning," said David de Garis, senior economist at National Australia Bank.
Data on Tuesday showed annual inflation cooled to 0.3 per cent last month, well below the European Central Bank's target of just under 2 per cent, increasing speculation the bank will take more easing steps.
The dollar added about 0.1 per cent against the yen to 109.67, after rising to a six-year high of 109.86 yen on Tuesday.
Oil crawled off overnight lows but remained pressured by the dollar's momentum. World oil prices tumbled to their lowest in more than two years, with US crude posting its biggest daily decline since 2012.
Brent crude added about 0.2 per cent on the day to $94.82 a barrel, after marking a 16 per cent loss for the quarter, the biggest in two years. US crude added about 0.2 per cent to $91.34 a barrel after shedding 12 per cent for the quarter, also its biggest quarterly loss in two years.
Copyright: Thomson Reuters 2014