* Dollar, euro wallow close to two-month lows against yen
* RBA decision awaited, with no policy change expected
By Lisa Twaronite
TOKYO, Feb 4 Investors braced for a rocky
session in Asia on Tuesday, with equities and the dollar under
pressure after disappointing U.S. manufacturing data cast a pall
over Wall Street.
MSCI's broadest index of Asia-Pacific shares outside Japan
was down about 0.5 percent in early trade and
the greenback slipped 0.3 percent against a basket of
currencies to 81.065.
Data showing manufacturing activity slowed sharply last
month dealt a heavy blow to markets already nervous the U.S.
Federal Reserve's decision to taper its asset purchases would
lead to a capital flight out of emerging markets.
January's sharp fall in output activity came on the back of
the biggest drop in new orders in 33 years, while construction
spending barely rose in December, suggesting the U.S. economic
recovery is more tenuous than some investors had believed.
"In the past, there have been times when the dollar
benefited from a flight to quality but the source of the
market's concerns today stems from the U.S. and for this reason,
the greenback sold off as stocks tumbled," Kathy Lien, managing
director at BK Asset Management, said in a note to clients.
The benchmark S&P 500 index recorded its worst single-day
drop in seven months, while the CBOE volatility index soared
16.5 percent to close at its highest level since December 2012.
That sent the dollar as low as 100.77 yen and the
euro as low as 136.37 yen, levels neither pair had
touched since late November.
In early Asian trading, the dollar took back some lost
ground to buy 101.09 yen and the euro was nearly flat on the day
at 136.68 yen.
The Australian dollar was slightly higher at $0.8752, as
investors awaited the Reserve Bank of Australia's policy
decision due at 0330 GMT.
All analysts polled by Reuters expected the RBA to keep its
2.5 percent cash rate intact, although some said the central
bank might drop its easing bias.