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. The currencies of Indonesia, Malaysia and Thailand all hit multi-year lows, while the Indian rupee ploughed another historic trough.
Their stock markets likewise all fell between 1 and 2 percent, while the MSCI index of Asia-Pacific shares outside Japan .MIAPJ0000PUS shed 1.1 percent to a six-week low.
Japan's Nikkei .N225 fared somewhat better with a loss of only 0.4 percent, while Shanghai .SSEC was unscathed thanks to an upbeat reading on Chinese manufacturing.
Early indications were that European shares would also start weaker, though only modestly as yet. Both Eurostoxx 50 futures and DAX futures were off 0.2 percent.
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 U.S. Treasury yields up as far as 2.93 percent, highs last seen in July 2011. The break of a major chart bulwark at 2.90 percent could next see a test of 3 percent -- a major 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, while the Indonesian rupiah hits its lowest since 2009.
The rout in emerging markets overshadowed better news from China, though the chance of a pick-up in the world's second largest economy could prove much more important in the long term.
HSBC said its preliminary purchasing managers' index for China rose to 50.1 in August, a five-month high and just above the 50 level that separates growth from contraction.
"This is mainly driven by the initial filtering-through of recent fine-tuning measures and companies' restocking activities, despite the continuous external weakness," said Hongbin Qu, chief China economist at HSBC.
"We expect further filtering-through, which is likely to deliver some upside surprises to China's growth in the coming months."
That would be a big change given many had felt all the risks up until recently had been for a hard landing.
It was enough for Shanghai shares to recoup all their early losses to trade a whisker firmer.
Also helping was a Reuters poll showing Japanese manufacturers' optimism improved to the highest level in three years, as a weak yen boosted earnings for exporters of textiles, chemicals, steel and other metals.
The upbeat Chinese news also helped lift the Australian dollar almost half a cent to $0.8990. Around 70 percent of Australia's exports go to Asia and its currency is free- floating and liquid, so investors often use it as a proxy against emerging market risk.
The prospect of further increases in U.S. yields gave the U.S. dollar a modest lift against other major currencies. The euro was back at $1.3340, from a high of $1.3452 on Wednesday, while the dollar pushed higher to 98.22 yen.
The dollar index, which measures it versus a basket of six currencies, rose to 81.495 .DXY, from a low of 80.896.
Industrial commodities rallied in the wake of the Chinese data, with copper up 1.3 percent at $7,336.50 a tonne. Gold, more bothered more by the risk of Fed tapering and rising bond yields, backtracked to $1,362.96 an ounce.
U.S. crude oil futures were off just 5 cents at $103.80 a barrel, while Brent crude oil eased 29 cents to $109.52.