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TOKYO (Reuters) – Asian stocks dipped and cryptocurrencies extended losses on Wednesday as uncertainties over inflation prompted investors to reduce exposure to riskier assets for now.

Also weighing on digital coins was a new Chinese ban on financial institutions providing services related to cryptocurrency transactions.

MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.3% though Hong Kong and South Korea are closed for holiday.

Mainland China’s CSI300 slipped 0.6% while Japan’s Nikkei lost 1.1%.

Wall Street stocks slid late in the session to end lower on Tuesday, unable to sustain gains made after bumper earnings from Walmart and Home Depot.

The S&P 500 lost 0.85%, with telecom shares leading the decline, while the Nasdaq Composite dropped 0.56%.

“Now that investors are pre-occupied with inflation, they are probably reluctant to make big decisions until they see a clearer picture,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities.

“Inflation worries will keep markets uncertain for now, even though I don’t expect stock prices to collapse given economic re-openings.”

The Federal Reserve has stuck to the narrative that a recent rise in inflation would be transient and that it therefore should keep its easy monetary policy settings.

The minutes from the Fed’s April meeting, to be published late on Wednesday, are expected to repeat that message.

“Inflation remains the biggest theme, whether it is real and whether the Fed may need to change its policy because of that,” said Kazushige Kaida, head of forex sales at State Street Bank’s Tokyo branch. “At the moment, markets are putting faith, after a fashion, in the Fed’s narrative.”

Yet an unexpected pickup in consumer inflation and signs of a labour shortage in the United States have prompted investors to dump assets that had risen sharply over the past year.

Cryptocurrencies are one such extreme case.

Bitcoin dropped as much as 5.3% to hit its lowest level since early February and last stood at $40,973, having lost more than a third of its value from a peak of $64,895 hit just over a month ago.

Ether, the second largest cryptocurrency, changed hands at $3,199, down more than 25% from its record peak hit last Wednesday.

While cryptocurrencies were bruised by China’s fresh ban on their transactions, they were not alone in facing pressure.

Some commodities that have benefited from reflation trade have also lost steam, with U.S. lumber futures losing almost 25% in the last three sessions.

Oil prices pulled back also after media reports the United States and Iran have made progress on reviving a deal restricting the OPEC country’s nuclear weapons development, a development that could lead to increased supply from Iran. [O/R]

U.S. crude futures dropped 0.9% to $64.9 per barrel while Brent futures lost 0.9% to $68.12 per barrel.

That helped to slightly ease inflation worries in the bond market.

Ten-year U.S. inflation priced in the U.S. bond markets, based on the yield gap between inflation-protected bonds and conventional ones, ticked down to 2.55% from an eight-year high of around 2.58% hit earlier this month.

The yield on 10-year U.S. Treasuries, or the nominal yield, stood little changed at 1.664%.

In the currency market, the dollar stayed under pressure as U.S. yields stayed flat.

The euro hit a near-three-month high of $1.2234 and last traded at $1.2223 while the British pound also reached a high last seen in late February and changed hands at $1.4191.

The dollar stood at 108.92 yen after four straight sessions of decline.

Precious metals were solid, with gold hitting its highest level since late January and last stood at $1,870 per ounce.