The New Year rally in Asian shares ran out of steam on Thursday as concerns about the U.S. administration`s protectionist stance hit Wall Street while U.S. bonds were dented by speculation China may curtail buying.

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MSCI`s broadest index of Asia-Pacific shares outside Japan shed 0.1 percent in early trade, slipping further from Tuesday`s 10-year peak. Japan`s Nikkei lost 0.6 percent.

U.S. shares snapped their New Year rally on Wednesday while the Canadian dollar and the Mexican peso fell after a Reuters report said Canada increasingly believes that U.S. President Donald Trump will soon announce his intention to withdraw from the North American Free Trade Agreement treaty.

U.S. bond prices tumbled, boosting the benchmark 10-year Treasuries yield us10yt

"I would think that China is flexing its muscles as the United States is looking into measures to deal with its trade deficit with China," said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.

"I have been expecting rising trade frictions between the United States and China this year. It appears China is quick to touch the Achilles heel of the States," he added.

Investigations into U.S. imports are due to report to Trump this month, including probes into whether imports of steel and aluminium threaten U.S. national security. A separate probe into Chinese intellectual property practices may also conclude as early as this month, Axios reported, and could result in tariffs on the country’s consumer-electronics exports.

U.S Treasuries later pared some of their losses and the 10-year yield stood at 2.555 percent in early Asian trade.

The speculation that China may reduce its buying in U.S. bonds helped to underpin the euro, the most obvious alternative assets to the dollar.

The euro traded at $1.1950 eur

Against the yen jpy

It last stood at 111.40 yen, after hitting a six-week low of 111.27 yen the previous day.

The yen has been buoyed this week after a cut in the Bank of Japan`s bond buying on Tuesday fuelled speculation that the central bank could eventually seek to exit from its stimulus later this year, following in the footsteps of other major central banks.

The Canadian dollar traded at C$1.2559 per U.S. dollar after having lost 0.7 percent on Wednesday.

Crude oil prices jumped on Wednesday and settled near three-year highs after U.S. government data showed a drop in crude inventories and production, though the fall in the latter could be the result of extreme cold temperatures across the United States.

U.S. West Texas Intermediate (WTI) crude futures clc1

Brent crude futures lcoc1

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)