Asian stocks tumble as dollar hits new low

Hong Kong finished 1.46 percent, or 312.93 points, off at 21,088.86, ending a five-day rally.

Shanghai slipped 0.11 percent, or 3.07 points, to 2,695.29.

Stocks took their cue from a 1.03 percent fall on the Dow in New York, where investors returned from the Labor Day holiday to reports that Europe's banks may not be as strong as first thought.

The Wall Street Journal reported on Tuesday that stress tests in July to measure the strength of Europe's banks showed they held more potentially risky government debt than believed.

The results of the tests showed that all but seven of 91 lenders were strong enough to withstand future financial crises.

But the paper, citing its own analysis, said: “An examination of the banks' disclosures indicates that some banks didn't provide as comprehensive a picture of their government-debt holdings as regulators claimed.”

The report underscored concerns that the recovery of the European economy was more subdued than hoped following recent positive data.

The Nikkei in Tokyo was battered by falling exporters as the dollar continued to be pressured by the safe-haven yen amid uncertainty over the U.S. economy.

The dollar rebounded slightly to 83.60, but was well off its 83.84 in New York late Tuesday.

The gains came despite attempts by Japan's Finance Minister Yoshihiko Noda to talk his currency down.

Noda pledged “decisive” steps against the yen's strength when necessary but that led some players to sell the dollar, said a senior dealer at a major bank in Tokyo, showing what little affect verbal intervention is having.

The euro firmed to US$1.2717 in Asia from US$1.2678 in New York, where the single currency fell amid concerns over the European banks.

The euro slipped to 106.16 yen from 106.32 in New York.

“Expectations for currency intervention (by Japanese authorities) are starting to fade,” said Yutaka Miura, senior technical analyst at Mizuho Securities.

“If they're not going to move now, it's unlikely they'll intervene until the dollar falls below 80 yen,” he told Dow Jones Newswires.

Yutaka Yoshii, general manager at Mito Securities, said: “If the yen continues to strengthen on the back of government inaction, there will be further concerns that companies will need to significantly lower their profit forecasts.”

And Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets, said Prime Minister Naoto Kan was unlikely to act on currency markets before the ruling Democratic Party of Japan holds a leadership election next week.

Kan faces a challenge for the party's presidency — and therefore his job as prime minister — from kingpin Ichiro Ozawa, who has said he will intervene to weaken the yen.

Sydney was lower as traders were concerned that the re-election of Julia Gillard as prime minister would lead to the imposition of a controversial profits tax on miners.

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