Many Asian stocks slid on Tuesday, while yields on US Treasuries held near two-year highs as investors positioned for the probability that the US Federal Reserve will begin tapering stimulus as early as next month.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell for the fourth consecutive session to 131.33 -- its lowest level since July 9.
European markets were also looking weaker. Eurostoxx 50 futures were down 0.5 percent, DAX futures were down 0.6 percent, and CAC 40 futures were 0.6 percent lower.
Japan's Nikkei led Asian stocks lower with the benchmark index .N225 down 2.7 percent, reflecting the exposure of many Japanese companies to India and Indonesia.
Indonesia and Indian shares had yet another torrid session with stock markets down 4 and 1 percent respectively.
Punching through the 200-day moving average, the MSCI-ex Japan broke a key technical support level, potentially signaling further declines for the index.
The eventual withdrawal of cheap money by Western central banks has been the dominant theme for Asia's financial markets since late May, and emerging markets that have benefited from the Fed's easy policy are now feeling the pinch.
The Indian rupee cratered to a record low of 63.30 per dollar on Monday, and Indonesia's rupiah and Brazil's real both skidded to four-year lows.
The rupiah's pain was exacerbated by a 5 percent slide for local stocks .JKSE after they logged a 5.6 percent tumble on Monday and traders said key support levels for currency could be broken soon.
Analysts noted that the dollar's failure to rally broadly, despite sharp plunges in high-yielding currencies, suggested the market may already be positioning for a stimulus tapering.
The dollar was largely steady against a basket of major currencies .DXY as 10-year US Treasury yields marched overnight to two-year highs, offsetting fears of the impact of Fed stimulus reduction.
Emering market volatility was also spurring demand for the yen, said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore. "The yen tends to attract buying when tensions in the market increase," he said.
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Chinese shares have risen 7 percent so far this month, and that bounce may have