The U.S. currency dipped 0.2 percent to 112.98 yen, handing back some of the modest gains made overnight.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.2 percent and Japan's Nikkei lost 1 percent.
The spread between the two-year and five-year Treasury yields inverted this week and the two-year/10-year spread was at its flattest in more than a decade amid a sharp fall in long-term rates.
"The dollar could remain under pressure until this month's Fed meeting as long-term Treasury yields may not be able to mount a rebound until the market sees the Fed's stance on policy and the economy," said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.
Fed policymakers are due to gather at a Dec. 18-19 meeting, at which the central bank is widely expected to raise interest rates. Focus is on how many rate hikes the Fed could for 2019.
Also adding to global market jitters on Thursday was the arrest in Canada of a top executive of Chinese tech giant Huawei Technologies, fanning fears of further tensions between China and the United States.
The euro was little changed at $1.1346 after retreating from this week's high of $1.1419 scaled on Tuesday.
The Aussie was on a shaky footing after shedding nearly 1 percent the previous day on weaker-than-expected third quarter Australian gross domestic product data.
The pound was a shade lower at $1.2719.
Sterling had sunk to a 17-month low of $1.2659 on Tuesday after parliamentary setbacks for Prime Minister Theresa May but clawed back some of those losses on a more positive outlook for Brexit.
(With inputs from agencies.)