Markets mostly lower

HONG KONG (Reuters) - Asian stocks were mostly lower on Friday with Japanese exporters such as Sony further hit by strength in the yen, which was on track for its best weekly gain against the dollar in more than a year.

Renewed weakness on Wall Street on Thursday and ongoing caution after this week's global stock market rout sparked by China's worst drop in a decade on Tuesday kept markets under pressure.

"People are still very nervous about this correction after the U.S. and China markets fell yesterday," said Kim Joong-hyun, an analyst at Goodmorning Shinhan Securities.

"Trading could be volatile today, although falls may not be as bad because the correction has already been quite steep," he said of the South Korean market.

At 0048 GMT, Tokyo's Nikkei average .N225 had fallen 1.23 percent to three-week lows as Sony (6758.T) dropped 3.4 percent, Toyota Motor (7203.T) lost 1.65 percent and Canon Inc. (7751.T) shed 1.88 percent.

"Shares will likely fall today, given the decline in U.S. stocks and the rise in the yen," said Hiroichi Nishi, general manager of equity marketing at Nikko Cordial Securities.

The drop in risk appetite helped drive the yen higher as investors, who had borrowed the Japanese currency to finance bets on riskier assets, unwound their trades.

In South Korea, the key KOSPI eased 0.61 percent on the back of a 0.53 percent fall in market heavyweight Samsung Electronics (005930.KS) and a 1.84 percent drop for steel maker

POSCO (005490.KS).

A profit upgrade by top Australian investment bank, Macquarie Bank MBL.AX, helped lift the mood, and held the key S&P/ASX 200 index .AXJO at steady levels.

Macquarie Bank rose 2.25 percent, while takeover target Qantas (QAN.AX) advanced 2.14 percent, a day after Australia's competition regulator said it would not intervene in an $8.7 billion buyout bid for the airline.

MSCI's measure of Asian stocks excluding Japan .MSCIAPJ edged down 0.03 percent, after earlier reaching a trough last seen on January 15.

U.S. stocks slipped on Thursday but ended off early lows, helped by data showing unexpected strength in U.S. manufacturing. The blue-chip Dow .DJI eased 0.28 percent, while the tech-heavy Nasdaq Composite Index .IXIC lost 0.49 percent.