Asian shares fall to 9-month low as oil prices sink

Investors nervous after US shares post biggest weekly fall in 2 1/2-years last week

Asian shares slipped to nine-month lows on Monday as oil prices sank to fresh 5-1/2 year lows on concerns about a supply glut and slower global growth, hitting stocks of energy and commodity producers and exporters.

Investors were nervous after US shares posted their biggest weekly fall in 2-1/2-years last week on losses led by energy sector, and as they expect the US Federal Reserve to hint this week it is getting closer to raising interest rates.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.1% to its lowest level since March.

Japan's Nikkei share average fell 1.3%, drawing little momentum from Japanese Prime Minister Shinzo Abe's big election victory on Sunday, which was a boost for his reflationary economic policies.

US crude futures fell more than 2.5% at one point to as low as $56.25 per barrel before rebounding. By late morning, they were up 1.3%.

The world's energy watchdog late last week forecast even lower prices next year on weaker demand and increased supply, sparking a fresh waving of selling.

Oil's relentless slide pounded stocks and currencies exposed to energy exports on Friday, dousing the appetite for riskier assets.

Energy-exporting emerging market currencies were strained, with the Brazilian currency hitting a 9-1/2-year low and the Russian rouble hitting an all-time low. The Indonesian rupiah fell to its lowest since August 1998.

The Australian dollar hit a -1/2-year low of $0.8204.

The currency has so far seen limited impact from a hostage incident in a cafe in the heart of Sydney's financial district..

Falls in risk asset prices are pushing investors into the safety of government debt and other traditional safe havens such as the yen.

The dollar briefly fell to as low as 117.78 yen, edging near two-week low of a 117.445 hit last week, though the yen cut gains after the Bank of Japan's tankan corporate sentiment survey showed business sentiment at big manufacturers declined in December.

The dollar last stood at 118.67, down 0.1%.

The dollar's index against a basket of six other major currencies stood at 88.169, moving further away from a 5 1/2-year high of 89.550 hit a week ago.

"The risk-off sentiment may support the yen against the dollar in the next couple of days, though I do think the market will become bullish on the dollar after the Fed's meeting," said Osao Iizuka, chief dealer at Sumitomo Mitsui Trust Bank.

US Treasuries also gained, with the 10-year yield slipping to a two-month low of 2.071%.

Still, improving US economic data has added to bets that the Federal Reserve is moving closer to raising interest rates next year.

Many investors expect that the US central bank may change its vow to keep interest rates near zero for a "considerable time" when it meets for a two-day policy meeting starting on Tuesday.