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Asia: Stocks dip before US jobs report, US dollar nurses losses

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[TOKYO] The potential for a strong US non-farm payrolls number later in day - and with it an elevated chance of a Federal Reserve rate hike soon - kept Asian financial markets nervously marking time on Friday.

MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.1 per cent.

Australian stocks lost 0.6 per cent and South Korea's Kospi was little changed, while Japan's Nikkei dipped 0.2 per cent on a slightly stronger yen.

Asian equity markets took few cues from overnight moves on Wall Street, where stocks were flat with gains in the tech sector offseting sluggish US factory activity data and lower oil prices.

A report from the Institute of Supply Management (ISM) on Thursday showed US factory activity contracted for the first time in six months in August as new orders and production tumbled.

The downbeat data weakened the US dollar, which had been bullish through much of the week, by tempering some recent optimism on the US economy which had revived expectations for a near-term rate hike by the Federal Reserve.

Given the weak ISM manufacturing report, markets will look to Friday's payrolls to see if the Fed can risk raising rates this month or later this year. Economists polled by Reuters expect the US economy to have added about 180,000 jobs in August.

"While the US manufacturing ISM did undershoot expectations by quite a margin, it is worth remembering that the Fed hiked last year when the ISM manufacturing was at 48.0 and had been sub-50 for three consecutive months," wrote Sharon Zellner, a senior strategist at ANZ.

"There is therefore potential for markets to whipsaw should we see robust US jobs data tonight, going into the US Labor Day holiday weekend."

The US dollar was flat at 103.280 yen after coming down from a one-month high of 104.00 overnight. The euro traded little changed at US$1.1203 after bouncing about 0.3 per cent overnight. The common currency was at a three-week low of US$1.1123 earlier in the week.

The US dollar had surged against its peers following a relatively hawkish speech by Fed Chair Janet Yellen last Friday, which revived expectations the US central bank was moving closer to a hike.

Sterling was effectively unchanged at US$1.3273 after jumping 1 per cent overnight on purchasing managers' index (PMI) data showing the British manufacturing sector staged one of its sharpest rebounds on record in August.

The post-Brexit surprise boosted the pound as it could prompt the Bank of England to rethink the need to cut interest rates again if other surveys confirm the trend.

In commodities, crude oil posted a modest bounce after tumbling on Thursday as a growing glut from US crude stockpiles soured market sentiment.

US crude was up 0.9 per cent at US$43.52 a barrel after sliding 3.4 per cent overnight to a three-week low.