HONG KONG – Asian stocks fell on Wednesday as investors failed to find any cheer in strong US economic data and instead considered what it might mean for a hawkish Federal Reserve, with a surging dollar weighing heavily on regional currencies.

Tracking Wall Street's losses, MSCI's broadest index of Asia-Pacific shares outside Japan dipped 1.5 percent in early trading and Japan's benchmark Nikkei average opened down 1.12 percent.

Fixed-income markets came under heavy pressure with US 10-year treasuries yields rising to 3.365 percent on Wednesday, the highest since June 16.

Data overnight showed the US services industry picking up in August for the second straight month amid stronger order growth and employment.

While that reinforced views the economy was not in recession, it also added to expectations the US central bank would not be slowing the pace of interest rate hikes any time soon.

"The good news for the real economy has now become bad news for the market – both for the bond and the stock market," said Redmond Wong, Hong Kong-based Market Strategist of Greater China at Saxo Capital Markets.

Weaker than expected jobs data last week ignited hopes the Fed may consider a soft landing with slower rate hikes, but "that hope pretty much vanished again" on the new set of numbers, he added.

"Investors we talked to … have lost quite a bit of confidence in the (stock) market," Wong said, adding investors have showed renewed interest in high-grade bonds to gain cash flow from coupons.

Australia's S&P/ASX 200 lost 1.29 percent. Its economic growth in the second quarter this year picked up speed, offering hope activity can weather sharply higher interest rates and cost-of-living pressures. 

Asian currencies tumbled against the dollar due to a surge in the US bond yields.

The Japanese yen hit a fresh 24-year low of 143.57 per dollar.

In energy markets, crude oil prices stumbled on weaker consumption forecast. US crude fell 1.22 percent to US$85.8 per barrel and Brent was at US$92, down 1 percent on the day.

Spot gold lost 0.4 percent to US$1,694 an ounce.