Asian markets dived on Thursday, with Tokyo’s Nikkei losing more than six per cent at one point, and the dollar hit a two-month low against the yen on expectations that central banks’ monetary easing measures will end soon.
Dealers ran for cover after a Wall Street sell-off, with the US Federal Reserve in focus before a policy meeting next week that many fear will herald the end of its USUS$85 billion-a-month bond-buying.
Tokyo had slumped 4.61 per cent in the afternoon, having crumbled 6.57 per cent at one point in the morning.
Hong Kong had shed 2.68 per cent by the break, Sydney fell 0.65 per cent and Seoul skidded 1.03 per cent.
Shanghai tumbled 3.08 per cent in the first session back since weak trade and investment data at the weekend reinforced fears about a slowdown in the world’s number two economy.
There were also big losses for markets in emerging economies, with foreigners removing cash they had invested on the back of the Fed’s money-printing splurge as they sought better returns than in the West.
Manila, which last month sat at record highs, dived four per cent, Bangkok tumbled 4.60 per cent and Jakarta was 1.54 per cent lower.
Sentiment has been battered this week after Japan’s central bank held off unveiling any new monetary easing measures.
It also reignited traders’ fears, which have been growing for several weeks, about the so-called quantitative easing by the Fed as the US economy shows signs of improving.
Fed chief Ben Bernanke unveiled the scheme in September, saying the bank would continue to print money until the world’s biggest economy was strong enough to stand on its own two feet.
Japanese stocks took the brunt of Thursday’s heat as the yen extended its gains against the dollar.
In Tokyo forex business the dollar was at 94.76 yen -- near lows last seen in early April and down from 95.88 yen in New York late Wednesday.
The US unit, which was sitting in the high 98-yen range in Tokyo at the start of the week, has dived around 8.5 per cent since its spike late in May.
“The Nikkei falls because the dollar/yen falls, then the dollar/yen falls further because the Nikkei has fallen -- markets are in this vicious circle,” said Atsushi Hirano, head of FX sales Japan at Royal Bank of Scotland.
The euro was at US$1.3355 compared with US$1.3335 in New York, while it bought 126.54 yen, from 127.86 yen.
On Wall Street the Dow fell 0.84 per cent, the S&P 500 also slid 0.84 per cent and the Nasdaq was down 1.06 per cent.
“We have seen such wild fluctuations lately that few investors want to press on with buying,” said Hirokazu Kabeya, senior strategist at Daiwa Securities.
“It’s a kind of a chicken-and-egg situation -- volatile markets keep buyers away and the absence of buyers leads to market volatility. We are trapped in a negative spiral right now.”
Oil prices were lower, with New York’s main contract, light sweet crude for delivery in July, down 37 cents at US$95.51 a barrel. Brent North Sea crude for July was 21 cents off at US$103.28.
Gold was at US$1,389.25 at 0410 GMT from US$1,377.00 late Wednesday.