Asian markets were under the cosh on Thursday as a spike in US bond yields drove up borrowing costs globally, and even surprisingly strong data from China couldn't completely staunch the bleeding.
Emerging markets again bore the brunt of the selling as many have come to rely on cheap dollars to underpin domestic demand and fund current account deficits. Currencies in Indonesia, Malaysia and Thailand all hit multi-year lows, while the Indian rupee ploughed another historic trough.
Their stocks markets likewise all fell between 1 and 2 per cent, while the MSCI index of Asia-Pacific shares outside Japan shed 1.1 per cent to a six-week low.
Japan's Nikkei fared somewhat better with a loss of only 0.6 per cent, while Shanghai was uscathed thanks to an upbeat reading on Chinese manufacturing.
Driving the flight of funds were minutes of the Federal Reserve's July policy meeting which showed it was still on track to start tapering stimulus as early as next month.
That sent 10-year US Treasury yields up as far as 2.93 per cent, highs last seen in July 2011. The break of a major chart bulwark at 2.90 per cent could see a test of 3 per cent, which itself is a huge psychological marker.
Treasury yields tend to set the benchmark for borrowing costs across the globe, so the rise will make it more difficult for indebted countries and companies to pay their bills.
Expectations of economic recovery in the United States and Europe also tends to make assets there more attractive, heightening the competition for global savings.
"Given that the recent capital outflows have been mainly triggered by yield differentials, the higher Treasury yields mean that there is unlikely to be a quick turnaround in Asian currencies, especially those economies with current account deficits," said Frances Cheung, a strategist with Credit Agricole in Hong Kong.
She listed India, Indonesia, Malaysia and Thailand as the most vulnerable. "The story about capital outflows could persist for a while."
India's rupee promptly slid past 65.00 per dollar for the first time ever,