Tokyo's Nikkei average closed down one percent at 17,601.57 and Hong Kong's Hang Seng index closed down 1.5 percent at 12,299.08. Singapore and Malaysia fell two percent.

The dollar slipped sharply from a high of 107.63 yen after Greenspan advised banks to set aside more money as insurance against a big financial market downturn. By 1043 GMT, it was below the 106 level at 105.53/63 yen. Markets were already cautious ahead of key US inflation data due later on Friday."Greenspan's comments arrived at a bad time...just when we were cautious about the Dow's weak rebound overnight," said Kunihiro Hatae, manager at Tokyo Securities Co Ltd.

The Dow Jones industrial average finished up 0.5 per cent at 10,286.61 in a volatile session as investors wrestled with good corporate earnings and the bad news of a jump in long-term interest rates to a new two-year high.Oil prices extended New York losses as investors continuedt o take profits after the price surge earlier this week. At 1043 GMT, oil was down 29 cents per barrel at $22.16. Brent was down 26 cents at $21.63.

South Korea's main index shed early gains to close down 0.4 percent. Taiwan's TAIEX closed down 0.8 percent at 7,819.09, as investors cashed in after four straight days of gains.

Australia's benchmark All Ordinaries index closed down 1.3 percent at 2,862.3. The New Zealand share market ended down one per cent at 2,106.12. Asian spot gold rose to $316.50/317.50 per ounce by 1044GMT after opening at $313.50/315.00. It closed at $312.50/314.50 in New York on Thursday.

"The gold price is well supported at $300. There are a lot of shorts that are not fully covered. I think we will see prices go up again," a trader said.

Greenspan's comments spooked Singapore investors and The Straits Times Index closed down 2.4 per cent to 2,061.25 - well below its crucial 2,080 support level.

Malaysia's benchmark stock index closed down 2.3 per cent at 721.18. Thailand's composite SET index ended down 1.9 per cent at 385.40. The Philippine 33-share composite index lost 1.6 per cent to end at 2,014.63 points, dragged down by heavyweight Metropolitan Bank and Trust Co.