Oil and gold prices fell on Monday as the dollar strengthened, dragging Asian shares lower, but Japanese equities outperformed on the back of the yen's slide to a fresh 4-1/2-year low against the US currency.

Investors remained cautious ahead of a set of data due later in the session to gauge the current state of the world's top two economies, the United States and China. Both countries will report retail sales for April.

"A strength in the dollar is weighing on commodities across the board," said Ben Le Brun, analyst at OptionsXpress in Sydney. "For oil, worries of ample supplies is putting pressure. We have unprecedented levels of stockpiles in the United States, with uncertainty surrounding economic growth."

US crude futures slipped 0.8 per cent to $95.23 a barrel and brent dropped 0.7 per cent to $103.16.

The dollar's strong performance also took the shine off gold, which typically serves as an alternative to the US currency. Spot gold fell as much as 1.5 per cent to a session low of $1,426.40 an ounce.

The yen slid to a fresh 4-1/2-year low against the dollar of 102.15 yen in Asia on Monday morning, having earlier hit its highest point since January 2010 against the euro at 132.385.

The drop in commodities prices weighed on the Australian dollar, which eased 0.2 per cent to $0.9980 after hitting an 11-month low of $0.9961 on Friday.

The dollar's firmness was also cemented after Japan avoided criticism from its peers for pursuing bold reflationary policies which have resulted in a steady decline in the Japanese currency, which improves earnings prospects for exporters and underpins the export-reliant Japanese economy.

Group of Seven finance officials agreed on Saturday to redouble efforts to deal with failing banks and gave a green light to Japan's drive to galvanise its economy.

Having urged Tokyo for years to do something to revive its economy, other world powers are not in a position to complain now that it is doing so. Also, central banks such as the Federal Reserve and Bank of England have printed money in the way the Bank of Japan is now.

"If international peers criticise the yen's weakness, investors who are on the nervous side could stop chasing the market higher. Now, such concerns are receding," said Kenichi Hirano, a strategist at Tachibana Securities.

The Nikkei stock average scaled a fresh peak since January 2008 of 14,847.20, rising as much as 1.6 per cent.

MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.6 per cent to a one-week low, after ending last week up 0.8 per cent.

Australian shares were down 0.2 per cent after closing at a five-year high on Friday, while South Korean shares held in a tight range.

"The yen's weakness and caution before a key set of data from China and the US are keeping investors at bay as the data are expected to be weak," said Park Hyoung-jung, a market analyst at Meritz Securities.

The Dow Jones industrial average and the Standard & Poor's 500 Index ended at record highs while the pan-European FTSEurofirst 300 index closed at its best level since mid-2008 on Friday.

US labour market data has pointed to a steady recovery trend in the world's largest economy, boosting the dollar and fuelling speculation that the Federal Reserve could scale back its aggressive monetary stimulus aimed at supporting growth.

The stock rally and speculation over the Fed pushed benchmark 10-year US Treasury yields up to their highest in about a month of 1.895 per cent on Friday.

Japanese government bond prices tumbled on Monday, tracking US bonds lower and also hurt by the Nikkei's rally, with the 10-year JGB yield hitting a three-month high of 0.750 per cent.

Elsewhere, removing a potential source of political instability in the Asian region, Pakistan's Nawaz Sharif, toppled in a 1999 military coup, jailed and exiled, has made a triumphant election comeback over the weekend and looks set to form a stable government capable of implementing reforms needed to rescue the fragile economy.

Gold fell $17.10 an ounce to $1,430.60 by 0159 GMT, nearing Friday's low of $1,420.61, its weakest since April 24.

Gold has fallen more than 14 per cent this year as investors switch funds into a rallying equity market and the dollar.

"So far, nothing in the market bodes well for an upside in gold. Gold needs to break above $1,487 to show an upward correction," said Joyce Liu, an investment analyst at Phillip Futures in Singapore.

"CFTC data shows an increase in bearish bets in gold, so that sends another bearish signal to retail speculators, who have no idea what the funds' view on gold is. There's probably some technical selling because we've broken below $1,440."  

US gold was at $1,429.80 an ounce, down $6.80.   

Hedge funds and money managers trimmed their bullish bets in gold futures and options in the week to May 7 on weaker bullion prices and outflows in gold exchange-traded funds, a report by the Commodity Futures Trading Commission (CFTC) showed on Friday.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund (ETF), said its holdings fell 0.24 per cent to 1051.65 tonnes on Friday after they rose slightly on Thursday. The holdings were within sight of a four-year low.

Cash and US gold futures plunged to around $1,321 on April 16, their lowest in over two years, after worries about central bank sales and a drop below $1,500 led to a sell-off that stunned investors, prompting them to slash ETF holdings Asian shares eased on Monday with sentiment hit by selling in commodities due to a strong dollar, which rose to a fresh 4-1/2-year peak against the yen on the back of growing confidence in the US economy.

Bullion hit an 11-month high in October last year after the Fed announced its third round of aggressive economic stimulus, raising fears the central bank's money-printing to buy assets would stoke inflation. – Reuters