Asian markets were mixed Thursday after the Federal Reserve left open the possibility it could lift interest rates this year, while investors kept an optimistic eye on China-US trade talks.
Equities and other risk assets have enjoyed a stellar start to the year on hopes for the negotiations as well as expectations the US central bank will slow its pace of monetary tightening - with some even tipping a cut - as growth both at home and globally slows.
On Wednesday, the Fed minutes showed its policy board was concerned about the outlook and trade tensions, and said US growth would "step down" from last year's rapid pace.
It also said it expects to continue to wind down its balance sheet of securities and other assets - which helps keep borrowing costs down -- but added "it was not yet clear" what rate moves "may be appropriate later this year".
The minutes showed there could be another hike if price pressures pick up.
Analysts said there was still a possibility of more increases in borrowing costs this year, after four in 2018.
"The debate is still focused on whether to tighten or not, and not whether to cut," said Lou Crandall, chief economist at Wrightson ICAP LLC. "The risk is tilted in the direction of more tightening."
In morning trade, Hong Kong was flat and Shanghai dipped 0.1% while Tokyo went into the break 0.1% lower.
Sydney rose 0.4%, Singapore slipped 0.2% and Seoul was off 0.3%. Wellington added 0.7%, Taipei was barely moved and Manila lost 0.5%.
Focus is mainly on Washington where high-level diplomats from the world's top two economies are looking to hammer out an agreement to resolve their nearly year-long trade row.
While there has been very little sign of progress, US President Donald Trump has insisted the talks are going "very well" and has indicated he could push back a deadline for a deal to be done, while investors remain upbeat.
However, observers warned of turmoil if expectations were not met.
"There's a lot of optimism baked into global markets on the outcome of the negotiations and precisely zero detail on the actual result," said Jeffrey Halley, senior market analyst at OANDA.
"A suboptimal outcome could make for a potentially ugly correction in equities and currencies in particular."
On currency markets, the pound extended Wednesday's losses that came after Fitch warned it could slash Britain's credit rating owing to the economic hit from a potential no-deal Brexit.
Adding to sterling's weakness was Prime Minister Theresa May's failure to get a breakthrough in talks with European Commission President Jean-Claude Juncker on revising their Brexit deal.
With just over a month until Britain leaves the bloc, May still has no agreement that she can push through parliament.
Adding to her woes was news that three MPs from her ruling Conservative party had quit over her handling of the issue.