Asian stock markets slumped on Thursday as the US Federal Reserve's latest multi-billion-dollar move to shore up the American economy was met with worldwide disappointment.
The dollar strengthened against regional currencies as investors sought its safe-haven status after the US central bank warned of serious downside risks for the global outlook.
The euro was also sent spinning to another 10-year low against the yen as risk aversion set in.
Tokyo fell 2.07 per cent, or 180.90 points, to 8,560.26, Seoul dived 2.90 per cent, or 53.73 points, to 1,800.55, and Sydney plunged 2.63 per cent, or 106.9 points, to 3,964.9, its lowest in more than two years.
Hong Kong tumbled 4.85 per cent, or 912.22 points, to 17,911.95, its lowest finish since July 2009, while Shanghai ended 2.78 per cent, or 69.90 points, lower at 2,443.06.
The Fed said after a two-day policy meeting that it would shift $400 billion in its shorter-term debt portfolio holdings to longer-term bonds, a move it said would lower rates for mortgage holders and businesses.
The plan -- nicknamed Operation Twist -- would also entice banks to put some of their idle reserves to work.
However, in announcing the new plan, the Fed warned of "significant downside risks to the economic outlook", with the economy struggling with slow growth, high unemployment and a depressed housing market.
"The Fed's economic view is sharply deteriorating and there seems to be little it can do as a next step with Republicans calling on the Fed not to intervene," Yutaka Miura, a senior technical analyst at Mizuho Securities, told Dow Jones Newswires.
And Mitul Kotecha, a strategist at Credit Agricole, said: "The overwhelming tone is likely to remain negative, especially as Operation Twist is unlikely to change the dynamic of a weak growth trajectory for the US and developed economies over the coming months."
Wall Street plummeted on the news. The Dow lost 2.49 per cent, the S&P 500 dropped 2.94 per cent and the Nasdaq shed 2.01 per cent.
Adding downward pressure to sentiment, especially in Shanghai and Hong Kong, was preliminary data from China showing manufacturing contracted for the third straight month in September due to ongoing troubles in the key US and European markets.
The early HSBC purchasing managers' index (PMI) fell to 49.4 in September from a final reading of 49.9 in August.
A reading above 50 indicates the sector is expanding, while a reading below 50 suggests contraction. The gauge stood at 49.3 in July, which was the lowest in 28 months and the first contraction in a year.
Investors were also digesting a series of downgrades by Moody's on three top US banks -- Bank of America, Wells Fargo and Citigroup -- saying it saw the US government less willing than before to rescue them if they become unstable.
With risk appetite waning, the dollar rose against regional currencies while the euro languished near 10-year lows versus the yen.
In afternoon Tokyo trade the euro was at 103.42 yen from 103.74 yen late in New York on Wednesday.
The European currency was also at $1.3530, down from $1.3566 but well down from the $1.3700 seen in Asia on Wednesday. The dollar edged up to 76.50 yen from 76.48 yen.
However, the greenback was at Sg$1.2903 against its Singapore counterpart after reaching a nine-month high of S$1.2969 in New York, and was at a one-year high of 1,180.10 Korean won.
Ongoing troubles in the eurozone and US economy has boosted the greenback at the expense of Asian units, some of which had touched record highs. It had been as low as Sg$1.1988 and 1,047.90 won.
The Australian dollar also fell below parity to the US currency, sitting at 99.74 US cents. The fall comes after the commodities-backed Aussie, which broke parity for the first time in October last year, hit a record high US$1.1081 in July.
The decision "brought disappointment, with the Fed announcing the minimum policy action expected while also warning of significant downside risks to the economic outlook," said National Australia Bank forex strategist John Kyriakopoulos.
"In response, risk-aversion escalated, which boosted 'safe haven' demand for the USD," he said.
Oil fell as the stronger dollar made the commodity more expensive.
New York's main contract, West Texas Intermediate for November delivery, was down $2.35 to $83.57 a barrel in late afternoon Asian trade, and Brent North Sea crude for November dropped $2.45 to $107.91.
Gold fetched $1,771.55 an ounce by 0800 GMT, down from the $1,805.80 it was at by 0900 GMT Wednesday.
In other markets:
-- Taipei dived 3.06 per cent, or 230.38 points, to 7,305.50.
HTC shed 5.33 per cent to Tw$710.0 while Taiwan Semiconductor Manufacturing Co was 4.17 per cent lower at Tw$69.0.
-- Manila tumbled 2.57 per cent, or 108.19 points, to 4,096.10.
Lepanto Mining fell 1.5 per cent to 1.29 pesos, Philippine Long Distance Telephone dived 2.3 per cent to 2,238 pesos and Alliance Global shed 3.2 per cent to 9.73 pesos.
-- Wellington edged 0.10 per cent, or 3.46 points, higher at 3,312.29.
Telecom (TEL.NZ) rose 1.5 per cent to NZ$2.64 while Fletcher Building fell 0.1 per cent to NZ$7.45. Fisher & Paykel jumped 3.5 pe rcent to NZ$3.48.