Asia markets were tested on Monday as the British pound fell more than 1 percent on fears preparing the United Kingdom is ready for a hard exit from the European Union, while shares of Japanese airbag maker Takata tumbled more than 8 percent.

The British pound tumbled from levels above USD 1.2176 to about USD 1.2036 Monday morning during Asian hours. The euro gained against the pound, climbing to 0.8824, from levels near 0.8720.

The currency's decline followed media reports that suggested Prime Minister Theresa May's government was prepared to make a "clean and hard" exit from the European Union, ahead of her speech Tuesday.

Traders expect volatility in the currency markets to persist ahead of May's speech.

"The market is now positioning for some fairly punchy rhetoric from Theresa May and this idea of "hard Brexit" and a clean break from the single market seems increasingly likely, with the government making a bid to gain full control over immigration," said Chris Weston, chief market strategist at spreadbettor IG, in a note.

Weston added the pound was now "an out-and-out political currency" with high volatility.

Takata shares were down 5.37 percent, recovering from earlier losses of nearly 11 percent, after the airbag maker reached a settlement agreement on Friday with the US Department of Justice on an ongoing investigation.

Takata said it agreed to plead guilty to one count of wire fraud for falsifying testing data and reports that were provided to automakers and would pay a criminal fine of USD 25 million.

The company added it will establish a USD 125 million restitution fund for individuals affected by its faulty airbags and another USD 850 million restitution fund for automakers who received falsified testing data.

Meanwhile, the broader Nikkei Stock Average was off 0.68 percent as the yen strengthened, with major export stocks under pressure.

The yen fetched about 114.35 versus the dollar, compared to levels above 116 the pair traded in the previous week.

Shares of automakers Toyota fell 0.68 percent, Nissan was off by 0.3 percent, Honda slipped 0.35 percent and electronics giant Sony fell 0.65 percent.

Nintendo shares extended Friday's loss of more than 5 percent to trade down 2.21 percent. The storied Japanese gaming giant released details about its upcoming next-generation gaming console - Nintendo Switch - last week, but investors were unimpressed by the higher-than-expected pricing.

Chinese markets were under heavy pressure in early trade. The Shanghai composite fell 1.1 percent and the Shenzhen composite dropping 1.479 percent. Hong Kong's Hang Seng index declined 0.73 percent.

At a meeting last Friday to gather opinions from experts and entrepreneurs for the draft of an annual government report, Chinese Premier Li Keqiang said China's economy is set to face more pressure and problems this year amid changes in global politics and economic challenges, Reuters reported.

In South Korea, the Kospi traded down 0.42 percent.

Samsung Electronics shares fell 0.43 percent ahead of a South Korean special prosecutor's decision on whether to seek an arrest warrant for Samsung Group's leader Jay Y. Lee in connection with an influence-peddling investigation, reported Reuters.

The smartphone giant is also set to announce the results of its investigation on what caused some of its Galaxy Note 7 handsets to catch fire on Jan. 23, according to Yonhap News Agency. Samsung discontinued the Note 7 series last October, only a few months after its August launch.

Australian shares were up, with the ASX 200 gaining 0.47 percent. The materials sector advanced 1.36 percent, as major resources producers gained more than 1 percent each, while the energy sector fell 0.48 percent.

Shares of Rio Tinto was up 1.3 percent, Fortescue climbing 2.19 percent and BHP Billiton advancing 1.56 percent.

In the broader currency market, the dollar traded at 101.49 against a basket of currencies, while the Australian dollar traded at USD 0.7485.

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First Published:Jan 16, 2017 7:45 AM IST