The yen hovered near an 18-month high against the dollar as concerns about credit-related losses at US banks prompted investors to trim risky carry trades, in which they borrow low-yielding currencies to buy higher-yielding ones.

The dollar fetched 109.63 yen in early Asian trade, well off the high of about 118 yen seen just a month ago.

By 8.35am, Tokyo's Nikkei average had fallen 0.1 per cent, while MSCI's measure of other Asia Pacific stocks gained 0.3 per cent.

On Monday, the MSCI index slid nearly 4 per cent, posting its steepest slide since the 5.7 per cent tumble on Aug 16. The index has fallen more than 10 per cent from the Nov 1 record high, the second double-digit pullback from a peak this year.

'Concerns are growing the credit market strains are going to last longer than expected and hurt the US economy well into next year, dampening appetite for stocks,' said Mr Lee Kyung Soo, an analyst at Daewoo Securities in South Korea.

Still, investors saw some value emerging in beaten-down financial stocks. Australia's Westpac Banking and Commonwealth Bank both rose more than 1 per cent, while Japan's top lender Mitsubishi UFJ climbed 4 per cent.

But Australia's biggest investment bank, Macquarie Group, dropped 3.7 per cent after giving a cautious outlook.

Investors also sold major Japanese exporters such as Canon, fearing the rising yen would dent dollar profits at these firms.

KUALA LUMPUR
The Kuala Lumpur Composite Index opened up 0.45 points to 1382.80.

TOKYO
- The Nikkei average opened down 0.3 per cent on Tuesday, led down by exporters such as Canon, following a sharp rise in the yen against the dollar.

By 8.01am, Nikkei average had fallen 48.93 points to 15,148.16.

The broader Topix index fell 0.4 per cent to 1,454.87. -- REUTERS