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Asian stocks dipped on Tuesday, retreating from record highs as lingering concerns about potential roadblocks to the Biden administration's $1.9-trillion stimulus weighed on sentiment, dragging US Treasury yields to three-weeks lows.
The lower risk appetite lent some support to the dollar against a basket of currencies, while oil prices edged down.
In a sea of red seen across Asian markets, South Korea and Hong Kong topped losers and fell 1.7 per cent each, Japan slipped 0.6 per cent and Chinese stocks shed 1.5per cent. All have touched milestone highs this month.
MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.7 per cent to 722.7 but was not far off from a record high struck on Monday and is still up 9per cent so far this year.
Australian stock markets were closed for a national public holiday.
E-mini futures for the S&P 500 slipped 0.26per cent.
All eyes were on Washington as US lawmakers agreed that getting Covid-19 vaccines to Americans should be a priority evenas they locked horns over the size of the pandemic relief package.
"The immediate question now is when stimulus aid will beapproved and how much?" said Christopher Grisanti, chief equitystrategist at MAI Capital Management.
Financial markets have been eyeing a massive package, though disagreements have meant months of indecision in a country suffering more than 1,75,000 Covid-19 cases a day with millions out of work.
Fourth-quarter gross domestic product data for the US, Germany and France due out this week may cool sentiment.
Overnight, the Nasdaq index scaled a new peak and added 0.7 per cent on hopes of strong earnings later this week from technology titans, but the Dow Jones Industrial Average index struggled to keep pace and fell 0.12 per cent.
European shares closed at two-week lows as a slump in German business morale underscored the damage from tighter Covid-19 restrictions.
US policymakers are expected to keep the monetary spigot open when the Federal Reserve's Federal Open Market Committee meets on Tuesday and Wednesday.
"We expect the January FOMC to repeat and reinforce the Fed's existing dovishness, which is still significant given there cent taper discussions and other central banks' considerations to adapt policy," Ebrahim Rahbari, FX strategist at CitiFX, said in a report.
"Dovish Fed policy is a key driver for our view of upside in risk assets and bearish USD view. We therefore continue to watch Fed-speak and potential policy changes closely," he said.
The dollar advanced to a near one-week high against a basket of currencies, as volatility in stock markets around the globe sapped investors' appetite for riskier currencies.
The euro slipped slightly overnight to $1.2142 and held around those levels in Asia trade.
Benchmark 10-year US Treasury yields held where they left off in New York at 1.0414per cent, having hit a three-week low of 1.0300per cent overnight.
Brent crude fell 0.2per cent to $55.75, having risen nearly1per cent on Monday.
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