Asia markets lost ground on Monday across the board, with many traders likely taking to the sidelines ahead of several central bank decisions this week.
The Japanese benchmark Nikkei 225 (Nihon Kenzai Shinbun: .N225) was down 0.70 percent after flirting with positive territory briefly. Last week, the index added 4.3 percent. Across the Korean Strait, the Kospi (Korea Stock Exchange: .KS11) was down 0.12 percent. In Hong Kong, the Hang Seng index (Hong Kong Stock Exchange: .HSI) was off 0.57 percent.
Chinese mainland markets were lower, with the Shanghai composite (Shanghai Stock Exchange: .SSEC) shedding 0.82 percent and the Shenzhen composite (Dow Jones Global Indexes: .DJSZ) off by 0.91 percent.
The U.S. Federal Reserve, the Bank of Japan (Tokyo Stock Exchange: 8301.T-JP) (BOJ) and the Reserve Bank of New Zealand (RBNZ) are all set to meet this week. Stephen Innes, a senior trader at OANDA Asia Pacific said, "while most of the focus will center on possible policy action from the BOJ, traders will be looking for forward guidance both from the Fed and RBNZ."
Innes predicts a "very bumpy ride" ahead this week.
Markets in Australia and New Zealand are closed for ANZAC day public holiday on Monday.
Despite shares' turn lower on Monday, most major markets have recovered from the steep sell-off seen in January. Most indexes across Asia have gained over the past three months, although many are still down for the year-to-date.
Richard Titherington from JPMorgan Asset Management told CNBC's "Squawk Box" on Monday that people are a lot less pessimistic about emerging markets today than they were at the end of January, contributing to the rally.
"We have seen a nice rally," he said. "Where we go from here is really decided by two things: where you see the dollar and where do you see the outlook for the Chinese economy."
In recent months, the dollar index (New York Board of Trade (Futures): =USD), which measures the dollar against a basket of currencies, eased from as high as 99.829 to lows of 93.627 as the Fed stayed pat on interest rates since its last hike in December. On the other hand, recent data coming out of Beijing have indicated a slight uptick in China as it undergoes a re-balancing from a manufacturing-intensive to service-oriented economy.
"If you think the dollar is going to continue to weaken, that's very positive for emerging markets," according to Titherington. "If you think China is stabilizing, that supports the story. If, on the other hand, you are pessimistic about China and you are a dollar bull, then it's probably time to be more cautious about emerging markets."
In the currency market, the yen (Exchange: JPY=) weakened sharply against the dollar, trading at the 111 handle, compared with the 107 handle briefly touched early last week. In the previous session, the yen finished at 111.78 to the dollar and on Monday, as of 12:34 p.m. HK/SIN, the pair traded down 0.47 percent at 111.25.
Kathy Lien, managing director of foreign exchange strategy at BK Asset Management, said the weakness in the yen was driven by expectations for the BOJ meeting later this week.
"There are now reports that the BOJ could introduce negative lending rates to complement negative deposit rates," Lien said in a note Friday. "With the Japanese economy struggling under the weight of a strong yen and slower global growth and speculators holding a record amount of long yen positions, the chance of easing by the BOJ is high."
The Japanese central bank is set to meet and announce its monetary policy decision this week, with half the analysts polled by Reuters expecting further easing.
Market watchers also expect the Fed to stand pat at this week's policy meeting, but Innes said traders will be watching the accompanying statement closely. "Currently, the market is at odds with the Fed's anticipated trajectory, with traders only pricing in one rate hike in 2016 versus the Fed's guidance suggesting two rate hikes."
Innes, however, said shifting global dynamics might change some of the Fed's rhetoric as the improving global economic landscape, while encouraging, is fragile and domestic stateside data has been less than supportive of a rate hike. "Unless there's a clear cut improvement on both domestic inflation and growth, coupled with solid concrete improvement in the global economic landscape, it's likely the Fed will err dovish through the second half of 2016," he said.
Major exporters in Japan were mixed, with shares of Toyota (Tokyo Stock Exchange: 7203.T-JP) up 1.3 percent, Honda (Tokyo Stock Exchange: 7267.T-JP) up 0.85 percent and Sony (Tokyo Stock Exchange: 6758.T-JP) down 6.13 percent. Usually a weaker yen is a positive for exporters as it increases their overseas profits when converted to local currency.
Sony shares tumbled after reports said the Japanese electronics maker said on Friday it would delay announcing earnings forecasts for the 2016 fiscal year to assess damages from the earthquakes that hit southern Japan two weeks ago. Reuters said the company was scheduled to release the forecasts on April 28, but will now delay it until May.
Shares of Mitsubishi Motors (Tokyo Stock Exchange: 7211.T-JP) were down 5.16 percent on Monday, after tumbling more than 41 percent last week amid news that it hadfalsified fuel economy test data to make emissions levels look more favorable. Year-to-date, Mitsubishi shares are down by more than 50 percent.
Reuters reported the troubled Japanese car maker is unlikely to issue an earnings forecast for the current financial year when it announces results this week. Citing a person close to the company, Reuters said this was due to uncertainty about the financial impact of its misleading fuel economy data.
Oil prices retreated during Asian hours, with U.S. crude futures down 1.46 percent at $43.09, while global benchmark Brent fell 1.2 percent to $44.57 a barrel.
Asian energy plays were mostly lower, with shares of Inpex (Tokyo Stock Exchange: 1605.T-JP) down 1.57 percent and Japan Petroleum down 0.49 percent, while Chinese mainland shares of Sinopec (Shanghai Stock Exchange: 688-SZ) fell 2.46 percent.
Investors will be watching news out of Saudi Arabia, the de-facto leader of OPEC, as the country's 30-year-old deputy crown prince is expected to lay out his "vision" to diversify the Saudi economy, making it less dependent on oil and better able to employ its citizens.
Major indexes in the U.S. closed mixed Friday, with tech stocks leading declines after earnings in the sector disappointed. The Dow Jones industrial average (Dow Jones Global Indexes: .DJI) closed up 0.12 percent, the S&P 500 (INDEX: .SPX) was flat and the Nasdaq composite (NASDAQ: .IXIC) was down 0.8 percent.
Shares of major tech names, including Microsoft (NASDAQ: MSFT) and Google's parent Alphabet (NASDAQ: GOOGL), declined more than 5 percent after missing on earnings.
