In Tokyo expectation that officials could soon step into the currency markets were raised when the yen approached its record high against the dollar and Japan's finance minister said the unit was "strongly overvalued".
Tokyo tumbled 1.32 percent by the break, Hong Kong fell 0.67 percent in early trade, Sydney shed 1.37 percent and Seoul fell 1.61 percent while Shanghai dived 1.76 percent.
The losses came a day after a rally on news that an 11th-hour deal had been struck between the White House and Democrats and the Republicans to raise the country's debt ceiling and avoid a catastrophic default.
On Monday the US House of Representatives voted in favour of the deal and it must now go to the Democrat-led Senate, where it is also expected to pass.
However, despite the good news -- which brought to an end months of bickering -- dealers turned their attention to the high possibility that the US AAA credit rating could be downgraded for the first time ever.
Such a move would push up US interest rates, making debt payments more expensive and hitting the already spluttering US economy, still grappling with historically high unemployment of 9.2 percent.
Adding to traders' woes was a raft of weak figures from the United States and other major economies.
Earlier Monday the United States said manufacturing slowed to a near standstill in July, days after it announced the economy grew only 1.3 percent in the second quarter, after 0.4 percent in the first, the weakest growth since exiting recession two years ago.
The imminent end to the US debt saga "lifts an overhang on global markets but we think deteriorating growth outlook is the bigger overhang", ING Financial said in a note to clients, according to Dow Jones Newswires.
China, an economy on which many other nations rely to drive growth, also slowed abruptly -- with one survey suggesting contraction -- while there was similar bad news in Australia, Taiwan and India.
The poor economic figures hit Wall Street, which closed before the debt vote.
The Dow shed 0.09 percent, the S&P 500 dropped 0.41 percent and the Nasdaq drooped 0.43 percent.
Eyes are also on the release Friday of key jobs figures, which will provide another snapshot of the state of the economy.
On currency markets the dollar fell briefly to 76.29 late in New York on Monday -- near its post-World War II low of 76.25 yen on March 17 in the wake of the Japan earthquake-tsunami.
The yen's surge then prompted a joint intervention by Japan and other members of the Group of Seven.
The greenback firmed in early Tokyo trade and was at 77.52 yen before the break, helped by the US vote.
However, Japanese authorities remain ready to step in at any point, a person familiar with the country's currency policy affairs told Dow Jones Newswires on Tuesday.
"Japan can conduct intervention at any time," the source told the wire.
But the source declined to say how close the authorities were to taking action.
The euro rose to $1.4265 from $1.4248, and to 110.56 yen from 109.98 yen.
New York's main contract, light sweet crude for September delivery, gained 40 cents to $95.29 a barrel.
Brent North Sea crude for delivery in September rose 16 cents to $116.97.
Gold opened in Hong Kong at $1,619.00-$1,620.00 an ounce, up from Monday's finish of $1,615.00-$1,616.00.
Copyright AFP (Agence France-Presse), 2011