The Federal Reserve's April minutes upped the prospect of an interest rate hike, sending the dollar higher, spurring divergent performance in Asia markets on Thursday.

"Markets are playing catch up to communications from the US Federal Reserve as they appear to have dramatically under-priced the likelihood of a rate rise over the coming months," noted Angus Nicholson, a market analyst at IG, in a note Thursday.

Japan's benchmark Nikkei 225 index tacked on 0.68 percent, likely driven by the stronger dollar helping to push down the persistently stronger yen, which has been dampening earnings for the country's exporters.

The dollar was fetching 110.11 yen at 8:38 a.m. SIN/HK, the highest levels for the pair since late April, compared with levels around 109 yen on Wednesday.

Australia's S&P/ASX 200 slipped 0.27 percent, as a 0.39 percent gain in the heavily weighted financials subindex was offset was sharp drops in the energy and materials subindexes. Commodity prices, which are denominated in dollars, may take a hit from a stronger greenback.

South Korea's Kospi shed 0.38 percent; higher interest rates in the US may spur fund outflows from the country.

Japan's benchmark Nikkei 225 index tacked on 0.68 percent, likely driven by the stronger dollar helping to push down the persistently stronger yen, which has been dampening earnings for the country's exporters.

The dollar was fetching 110.11 yen at 8:38 a.m. SIN/HK, the highest levels for the pair since late April, compared with levels around 109 yen on Wednesday.

Australia's S&P/ASX 200 slipped 0.27 percent, as a 0.39 percent gain in the heavily weighted financials subindex was offset was sharp drops in the energy and materials subindexes. Commodity prices, which are denominated in dollars, may take a hit from a stronger greenback.

South Korea's Kospi shed 0.38 percent; higher interest rates in the US may spur fund outflows from the country.

The minutes of the Federal Open Market Committee's April meeting, released Wednesday in the U.S., were remarkably direct about the central bank's intentions on interest rates.

"Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation making progress toward the Committee's 2 percent objective, then it likely would be appropriate for the Committee to increase the target range for the federal funds rate in June," the minutes said.

The market didn't need to resort to tea leaves to divine the meaning.

"Despite all the caveats, the message they intended to send was that June was seriously live," Steven Englander, global head of G10 foreign-exchange strategy at Citi, said in a note late Wednesday.

That pushed up the greenback, with the dollar index, which measures the dollar against a basket of currencies, trading at 95.173 at 8:40 a.m. SIN/HK time, touching levels above 95 in the U.S. session for the first time in about a month.

Financial shares were higher as higher interest rates may spur better earnings in the sector. In Australia, ANZ was up 1.21 percent and in Japan, Mizuho Financial gained 1.90 percent.

Commodity stocks around the region lost ground.

Oil prices fell early Thursday, after recently climbing to the highest levels so far this year amid supply concerns after disruptions in Nigeria, Canada, Libya and Venezuela. US crude oil futures fell 0.93 percent to 47.74 a barrel by 8:46 a.m. SIN/HK in Asia trade after settling the US session down 12 cents or 0.25 percent. Brent was down 1.08 percent at USD48.40 a barrel.

Among energy plays, Australia's Woodside lost 1.21 percent and South Korea's S-Oil shed 2.21 percent. In Japan, Inpex dropped 2.88 percent after gaining more than 8 percent in the previous session.

Other resources stocks also fell. Heavyweights BHP Billiton and Rio Tinto were down more than 3 percent each.

Suzuki gained 5.93 percent after dropping 9.37 percent on Wednesday. The company on Wednesday confirmed media reports that it had used the wrong method to test the fuel economy of its cars in Japan.

The Dow Jones industrial average closed down 3.36 points, or 0.02 percent, at 17,526.62, the S&P 500 closed up 0.42 points, or 0.02 percent, at 2,047.63 and the Nasdaq composite closed up 23.39 points, or 0.50 percent, at 4,739.12.

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First Published:May 19, 2016 7:56 AM IST