(Fixes typographical error in headline)
* MSCI Asia-Pacific index down 0.35 pct, Nikkei sheds 0.85 pct
* Asia weighed after Wall St suffers worst month in 2 years
* Dollar supported amid prospects of hawkish Fed
By Shinichi Saoshiro
TOKYO, March 1 (Reuters) - Asian stocks skidded on Thursday after comments from the Federal Reserve’s new chief rekindled fears about the pace of U.S. monetary tightening this year, sending Wall Street tumbling for its worst performance in two years and lifting the dollar.
For weeks investors have been on edge, with the recent rout in equities cascading through financial markets amid concerns higher interest rates in advanced economies, led by the United States, could dent world growth.
Fed Chairman Jerome Powell, in his first public appearance as head of the U.S. central bank, vowed on Tuesday to prevent the economy from overheating while sticking with a plan to gradually raise interest rates.
That was enough to send investors out of stocks, with MSCI’s broadest index of Asia-Pacific shares outside Japan down 0.35 percent.
Australian stocks fell 0.8 percent and Japan’s Nikkei dropped 0.85 percent.
The losses came amid a broad selloff on Wall Street, where the Dow and S&P 500 capped their worst months since January 2016 overnight.
The Fed’s last round of economic projections in December pointed to three rate increases this year, but Powell’s testimony before the U.S. House of Representatives’ Financial Services Committee, prompted investors to increase bets on four rate increases in 2018.
The dollar got a lift on Powell’s comments. The dollar index against a basket of six major currencies rose to 90.698 overnight, its highest since Jan. 23 and last stood at 90.681.
The index has managed to claw back from a three-year low of 88.253 set in mid-February amid fears of a ballooning U.S. budget deficit and lingering worries that Washington could pursue a weak dollar policy took a toll.
“The comeback by the dollar could negatively impact crude oil prices and in turn cool inflation expectations. In that case, the equity markets could be forced to undergo significant adjustments,” said Makoto Noji, senior strategist at SMBC Nikko Securities in Tokyo.
U.S. crude oil futures stood little changed at $61.63 per barrel after sliding more than 2 percent overnight.
A stronger greenback tends to weigh on commodities including crude, as it makes it more expensive for non-U.S. buyers of the dollar-denominated products.
The euro was steady at $1.2192 and in close reach of a 1-1/2-month low of $1.2188 plumbed the previous day. The common currency came under pressure after data on Wednesday showed euro zone inflation slowing to a 14-month low and underscored the European Central Bank’s caution in removing monetary stimulus.
The Australian dollar was flat at $0.7763 after dipping to $0.7756, its lowest since late December.
Long-term U.S. Treasury yields stood little changed at 2.864 percent after declining about 3 basis points overnight on month-end purchases by investors rebalancing their portfolios and weaker Wall Street shares. (Editing by Shri Navaratnam)