Asia Stocks Steady as Dollar Wobbles

The U.S. dollar turned slightly lower in Asia trading Friday, quelling the recent rebound in the U.S. after President Donald Trump said the currency would get “stronger.”

Asian equities regained their footing after some initial softness. Hong Kong led gains following a rare bout of weakness the previous day, and, like Korea’s stock benchmark, is seeking another record high.

Still, many indexes in the region stuck close to Thursday’s finishing levels. Australian and Indian markets were closed for holidays.

“Asian bourses may tread more cautiously today amid the heightened trade and currency war signals coming out of the U.S.,” said OCBC Bank.

The dollar set a string of three-year lows this week after U.S. Treasury Secretary Steven Mnuchin said a “weaker dollar is good for trade.” That turned around Thursday when Mr. Trump said during a CNBC interview at the World Economic Forum in Davos, Switzerland, that “the dollar is going to get stronger and stronger, and ultimately I want to see a strong dollar.”

The WSJ Dollar Index jumped to 83.58 from 82.82 in U.S. afternoon trading. It was recently at 83.30, down 0.2% from late New York levels. The dollar fell to ¥108.50 on Thursday, before jumping to ¥109.75; it was at ¥109.38 midday in Asia.

The Nikkei, which was up 0.5% shortly after the open, traded slightly lower after the midday break in the wake of the dollar’s pullback.

A stronger dollar, “even if it is only short-term, sparked people to put on more U.S. risk, and I think that’s going to be the flavor of the day for Asia today,” said Stephen Innes, head of trading in the Asia Pacific at Oanda.

Japan’s Nikkei Stock Average was up 0.5% early Friday, but the gain slipped back to 0.2% after the U.S. dollar turned slightly lower. Photo: Rodrigo Reyes Marin/Zuma Press

The dollar’s rebound sent commodities prices down Thursday afternoon. Oil, which had hit fresh three-year highs, finished New York trading down slightly, while futures fell some 0.5% in early Asian trading. But the drop was trimmed to 0.2% for the global Brent benchmark as the dollar pulled back.

Gold prices rose slightly in Asia after falling more than 1% during the dollar’s gains.

Even before the dollar’s retreat, analysts were wondering whether the move high could be sustained. “The trend in place is still U.S. dollar weakness, and we still have a long way to go to break out of that,” said OM Financial private client manager Stuart Ive.

The next key event will be Mr. Trump’s speech at Davos, scheduled for early afternoon in Europe.

The Hang Seng Index was up 1.3% by the midday break, driven by a rebound in banking stocks. Morgan Stanley boosted its stock target on a number of Chinese lenders, including China Construction Bank and Industrial & Commercial Bank of China , for reasons including higher earnings forecasts.

The Shanghai Composite Index, which includes large-cap companies listed on the mainland as well as the country’s big banks, rose 0.5%. The sector has been key in both markets’ persistent gains the past month.

Write to Lucy Craymer at lucy.craymer@wsj.com

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