Most Asian indexes slide as dollar holds onto overnight gains after Yellen speech

Asian shares remained cautious on Wednesday as investors digested Federal Reserve Chair Janet Yellen's overnight speech and as North Korea tensions took a backseat.

The benchmark Nikkei 225 slid 0.41 percent in early trade despite the weaker yen as automakers, financials and trading houses pulled back.

Across the Korean Strait, the Kospi traded 0.03 percent above the flat line despite most tech stocks eking out gains after falling in the last session: Samsung Electronics rose 0.58 percent and SK Hynix added 0.61 percent. Most manufacturing and brokerage names saw declines.

Down Under, the S&P/ASX 200 came under pressure. The index traded lower by 0.06 percent in early trade as the information technology and telecommunication services sub-indexes weighed.

Fed Chair Janet Yellen's speech on Tuesday was regarded as slightly hawkish by market watchers after she said the central bank had to continue raising interest rates gradually in the face of "significant uncertainties."

However, Yellen also acknowledged that the Fed may have "misjudged" the strength in the labor market and inflation, suggesting the central bank could be more dovish in removing policy accommodation than previously expected.

The probability of at least one more rate hike by the end of the year stood at 77.9 percent on Wednesday, according to the CME Group's FedWatch tool.

The greenback touched a one-month high following Yellen's comments, although it later gave up some gains. The dollar index, which tracks the greenback against a basket of rival currencies, stood at 93.091 at 8:18 a.m. HK/SIN after reaching as high as 93.286 overnight. That compared with levels at the 92 handle earlier this week.

The dollar also clawed back gains against the Japanese currency to fetch 112.42 yen. The US currency had traded around the 111 handle during Asian trade on Tuesday after North Korea accused President Donald Trump of declaring war.

In news related to the hermit state, the US Treasury Department on Tuesday put sanctions on North Korean-linked banks and persons. The sanctions aimed to curb financial support for the North's weapons program. Trump said on Tuesday that the US was "totally prepared" to use the military option against the North, although that was not its preferred choice, Reuters said.

Meanwhile, US Commerce Secretary Wilbur Ross on Wednesday praised China for stepping up to the plate in ordering commercial banks on the mainland to stop doing business with Pyongyang.

Ahead, markets awaited headlines on US tax reform, which is expected to be unveiled on Wednesday US time.

US stocks closed mixed on Tuesday. The Dow Jones industrial average slipped 0.05 percent, or 11.77 points, to close at 22,284.32, but the S&P 500 and tech-heavy Nasdaq finished slightly higher.

In currencies, the euro extended losses after falling to its lowest levels in a month overnight, trading at USD 1.1780 at 8:32 a.m. HK/SIN. The common currency had slid following a weekend election in Germany, which delivered Chancellor Angela Merkel a fourth term, but also a need to form a coalition.

"Dollar strength overnight also owes something to further pressure on the euro, linked to Sunday's German election results and with an eye to an 'illegal' referendum on Catalonia independence this weekend and then looking ahead, Italian elections next year," said Ray Attrill, head of FX strategy at National Australia Bank.

On the energy front, oil prices edged up after falling overnight. Brent crude tacked on 0.27 percent to trade at USD 58.60 a barrel and US crude advanced 0.42 percent to USD 52.10. Prices had touched 26-month highs in the previous session after Turkey on Monday warned it could curb oil exports from Iraq to the rest of the world.

Here's the economic calendar for Wednesday (all times HK/SIN):

9:30 a.m.: China industrial profits3:30 p.m.: Bank of Thailand interest rates decision