Markets in Asia finished mixed on Tuesday, as investors remained cautious ahead of British Prime Minister Theresa May's speech on Brexit plans due later in the global day, as well as President-elect Donald Trump's inauguration stateside at the end of the week.
In her speech, May is expected to outline plans for the United Kingdom's to exit the European Union.
On Monday, the British pound fell to three-month lows, following local media reports that suggested May will announce a "clean" and "hard" Brexit. The plan, reports say, would pull the country out from the European market and the European customs union, in exchange for the ability to control immigration laws and leave the jurisdiction of the European Court of Justice.
"The PM is expected to walk a fine line between providing enough information on the government's intentions, without necessarily showing too much of Britain's negotiating hand ahead of official discussions with the EU," said Rodrigo Catril, a currency strategist at the National Australia Bank, in a note.
The pound strengthened against the dollar in the afternoon session during Asian hours, with the pound trading at $1.2115, up from an earlier low of $1.2014. The euro lost ground against the pound, with the pair trading at 0.8792, down from an earlier high of 0.8822.
Japan's Nikkei Stock Average closed down 281.71 points, or 1.48 percent, at 18,813.53, after see-sawing between gains and losses throughout the session. The Topix index slipped 21.54 points, or 1.41 percent, to 1,509.10.
The yen gained ground against the dollar, strengthening to as high as 113.32, up from levels above 116 in the previous week on safe haven demand. At 2:21 p.m. HK/SIN, the dollar/yen pair traded at 113.46.
"The yen was driven on the back of risk aversion as outsized movement on pound/yen was the primary driver," explained Stephen Innes, a senior trader at OANDA, in a note. "There has been less focus on the dollar/yen pair after last week's hefty position clear out."
The pound/yen cross fell from levels above 140 in the previous week to about 137.46 on Tuesday during Asian hours.
The currency's relative strength kept major Japanese exporters under pressure. Shares of automakers Toyota closed down 1.58 percent, Nissan declined 1.04 percent and Honda was off by 2.67 percent, while electronics maker Sharp fell 2.68 percent.