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Asian Markets Decline, Japan Closes 2% Lower

Asian markets were heavily soldoff Friday, with the exception of Chinese stocks, as the specter of a U.S. recession haunted Asian investors as the U.S. dollar hit a three-year lower against the yen and gold and oil prices struck all-time highs.

The dollar tumbled to 104.65 yen, its lowest since May 2005, after a
slide in the U.S. currency towards the key 105 yen level triggered a wave of stop-loss orders. Gold surged to a new high of $973.10 an ounce, up more than 16 percent this year, and crude oil hit $103 a barrel for the first time in history, fueled by the weak dollar and a fire at a big European gas terminal.

This was after U.S. Federal Reserve Chairman Ben Bernanke, in a second day of congressional testimony, warned that some U.S. banks could fail. Jobs and inflation data also proved to be gloomy reading, reinforcing fear of a recession. (For full coverage of Bernanke's testimony, click here.)

Japan's Nikkei 225 Average tumbled 2.3 percent to post a one-week closing low, with Sony and other exporters taking a beating on a clouded earnings outlook on the back of the strengthening yen. Growing worries about the U.S. economy also weighed on financial shares such as Mizuho Financial Group.

South Korea's KOSPI fell for the first time in a week, shedding 1.4 percent, hit by exporters such as LG Electronics and Hyundai Motor after weak U.S. jobs data renewed worries about a recession in South Korea's No.2 export market.

Australian shares pared back deep losses to close 1.4 percent lower. The S&P/ASX 200 Index, was down over 2 percent at one point, dragged lower by financial stocks. Debt-laden investor Centro Properties Group, dropped 21 percent after reporting a bumper first-half loss. Babcock & Brown and Macquarie Group also ended sharply lower.

Hong Kong stocks fell 1.1 percent as investors turned cautious on signs of weakness in the U.S. job market, and global bank HSBC Holdings slid after the Federal Reserve chairman said the troubled housing sector could lead to small-bank failures. Property stocks also skidded, but some resource stocks powered further, supported by fresh records in gold prices.

Chinese stocks bucked the negative trend and climbed over 1 percent, led higher by financial shares, as hundreds of billions of yuan locked up by China Railway Construction Corp's initial public offer were returned to investors. Ping An Insurance was on the rise. Its shareholders are due to vote on its huge fund-raising plan next Wednesday, and many analysts expect it to have to scale back or delay the plan, especially after Fuyao Glass said shareholder pressure had forced it to scrap a planned share offer.

Singapore's Straits Times Index was down 1.6 percent with selling across the board.