The New York Times reported on Tuesday that the U.S. administration is considering restricting sales of U.S. technology to Chinese video surveillance firm Hikvision.
The report undid some of the relief investors had drawn from a move by Washington late on Monday to row back a little on actions taken against Chinese tech giant Huawei.
"Traders don't know where to turn, but we do know the Chinese are not going to come back to the table when the U.S. is going after Chinese tech companies," said Chris Weston, head of research at Pepperstone brokerage, in a note.
Backed by higher treasury yields and bolstered by its safe-haven status, the U.S. dollar made broad gains, brushing a 3-1/2 week peak against a basket of other major currencies.
Overall risk appetite remained subdued ahead of the release of the minutes of the U.S. Federal Reserve's monetary policy review which concluded on May 1, when it signalled little appetite to adjust interest rates any time soon.
The baht weakened as much as 0.3% to 31.980 against the dollar, falling for a third straight session. Data showed Data released on Tuesday showed Thailand's customs-cleared exports fell 2.57% in April from a year earlier, after contracting 4.88% in March, mainly due to reduced shipments of electronics.
Data released on Monday revealed the trade-dependent Thai economy had grown at its slowest annual pace in more than four years in the first quarter, hurt by softer exports.
Like other Asian economies, Thailand has been caught in the cross-fire of the U.S.-China trade war and cooling global demand.
The Indonesian rupiah slipped up to 0.2% to a near a five-month low as opposition refused to concede defeat after the incumbent President Joko Widodo was declared the winner in elections held last month.
Investors are concerned whether Widodo's government can carry forward reforms amid the political tensions, with six people killed as violence erupted in Jakarta after the election commission confirmed Widodo's victory.
The Chinese yuan's decline was limited by the central bank announcing it would issue yuan-denominated bills in Hong Kong in the near future. Analysts said the move would tighten offshore liquidity and help stabilise the currency.
The yuan lost as much as about 0.2% on the day after gaining in the previous two sessions.
The Philippine peso, the Indian rupee and the South Korean won weakened slightly.
The Taiwan dollar dropped up to 0.3% as slowing global tech demand continue to hurt the country.
Data released on Monday showed export orders shrinking for a sixth successive month in Taiwan, whose hi-tech factories are major suppliers for global tech heavyweights.
The Malaysian markets were closed for a holiday.
(Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Simon Cameron-Moore)
By Aby Jose Koilparambil
