Stocks around the globe fell on Thursday after the Bank of Japan surprised markets by holding interest rates steady and declining to adopt more stimulus, pushing the yen sharply higher against major currencies.
The Japanese currency recorded its biggest one-day gains against the dollar, euro and sterling since March 2011.
The BOJ's decision was particularly jarring in the face of soft global demand and after earlier media reports said the central bank intended to cut rates deeper into negative territory.
The dollar fell to a 2-1/2-week low against a basket of currencies, weighed down by the yen's strong move and gains in commodity-linked currencies such as the Australian and New Zealand dollars.
Fed policy statement
The US Federal Reserve's decision on Wednesday to hold rates unchanged and its failure to signal strongly that a rate hike was coming at its next policy meeting in June also pressured the dollar lower, analysts said.
“The fact that the Fed was dovish and the BOJ did not deliver was certainly the hard combination that drove dollar/yen lower,” said Sebastien Galy, a currency strategist at Deutsche Bank in New York.
Tokyo's Nikkei stock index slumped 3.6 per cent overnight.
The Tokyo Stock Exchange will be closed for a national holiday on Friday and the benchmark Nikkei index ended the shortened trading week down 5 per cent.
Nikkei futures on the Chicago Mercantile Exchange were down 7 per cent ahead of the market's open on Monday.
Wall Street closed sharply lower as positive sentiment from Facebook's upbeat first-quarter earnings gave way to worry over the BOJ's decision.
Facebook hit an all-time high of $120.79 a share after the company said on Wednesday that quarterly ad revenue jumped 57 per cent. Its shares rose 7.84 per cent to $116.73.
The Dow Jones industrial average fell 210.79 points, or 1.17 per cent, to 17,830.76, the S&P 500 lost 19.34 points, or 0.92 per cent, to 2,075.81 and the Nasdaq Composite dropped 57.85 points, or 1.19 per cent, to 4,805.29.
A gauge of stocks around the world fell 0.35 per cent.
US Treasury prices
US Treasury prices rose, with the two-year yield hitting one-week lows as news of anemic US economic growth in the first quarter increased traders' skepticism about a coming Fed rate hike and stoked safe-haven bids for US government debt.
US gross domestic product grew at an annual rate of 0.5 per cent in the first quarter, its slowest pace in two years, while jobless claims for the latest week climbed from a 42-1/2-year low.
“It was a disappointing (growth) number and we are at full employment. I don't see the Fed going in June at this point," said John Bredemus, Vice-President of Allianz Investment-US in Minneapolis.
Oil prices touched fresh 2016 highs for a third day in a row, bolstered by the weakening dollar as investors looked beyond record high US crude inventories and relentless pumping by major producers to the prospect of future demand.
Brent futures rose 55 cents to $47.73 a barrel. US crude was up 42 cents to $45.75.