Chinese official and private-sector factory data also reminded investors of the fragile state of the global economy, while suggesting Beijing could avoid a hard landing. "The recent rise in equities was for the most part due to ample liquidity so when expectations for further easing fade, that element will be stripped and may weigh on equities," said Masafumi Yamamoto, chief forex strategist at Barclays Capital. "At the same time, fundamentals may not be so bad as to warrant further stimulus from monetary easing." The MSCI Asia Pacific ex-Japan fell 0.5 percent after rising 1.4 percent to a seven-month high on Wednesday. The euro edged up 0.1 percent to $1.3338. It fell more than 1 percent on Wednesday as the European Central Bank extended 530 billion euros ($709 billion) in cheap, 3-year loans, with more than 800 banks applying for funding, up from 523 banks in its first auction in December. The dollar held its ground after rising strongly on Wednesday when Bernanke, while offering a cautious view of the US economy, stopped short of signalling further Fed bond purchases, disappointing investors who were hoping for more stimulus. Data from China on Thursday supported hopes the world's second-biggest economy can avoid a hard landing, but also underscored the formidable headwinds facing the country as exports falter. China's official purchasing managers' index rose to 51.0 in February from January's 50.5, as the factory sector grew more than expected with export orders expanding for the first time in four months. "This suggests external demand for Chinese exports is recovering," ANZ Bank said in a note. The HSBC Flash PMI, a private sector survey that is the earliest indicator of China's industrial activity, hit a 4-month high of 49.7 in February, but new export orders shrank the most in 8 months as global demand weakened. Copper was guarded, holding steady at $8,505 a tonne, as investors digested the news. Markets are bracing for more factory data, including the US ISM manufacturing PMI and euro zone Markit manufacturing PMI due later in the day. INFLATION AND DOLLAR Bucking the decline in pan-Asia equities, Japan's Nikkei rose 0.4 percent after data showed Japanese companies unexpectedly raised expenditure in October-December from a year earlier, raising hopes that fourth-quarter GDP may be revised to a positive figure. The Nikkei was still below a seven-month high hit on Wednesday. Sentiment in Asian credit markets was cautious, with the spreads on the iTraxx Asia ex-Japan investment-grade index widening by a couple of basis points. As the ECB completed its much-awaited liquidity operation and Bernanke sounded a cautious note on extending the current super-loose monetary stance, gold was caught in the unwinding of positions built on expectations of more funding supplies from central banks. But spot gold recovered on Thursday to gain 1.4 percent to above $1,700 an ounce after falling 5 percent to below $1,690 an ounce on Wednesday as funds exited the bullion trade on speculation that central banks might be done with easy monetary policies. Oil steadied after two straight days of losses, with US crude hovering near $107 a barrel and Brent crude up 0.1 percent to $122.72 a barrel, after jumping 10.5 percent last month for its best monthly performance since February last year. Some analysts took note of Bernanke's comments as dollar supportive. "The US dollar pushes higher while equities retreat alongside metals as Bernanke gives a nod to inflation, departing from his last three speeches where he accentuated the extension of extremely low interest rates into 2014," said Ashraf Laidi, chief global strategist at City Index Group. Bernanke described rising gasoline prices as "primarily reflecting higher global oil prices -- a development that is likely to push up inflation temporarily while reducing consumers' purchasing power," adding that the Fed would continue to monitor energy markets carefully. "Bernanke seems to suggest the Fed is passively retreating from a dovish stance, encouraging markets to speculate that there will be no more easing, and allowing the dollar to firm to help contain inflationary pressures," Barclays' Yamamoto said.