AUD/USD pressured as Asian tech rout wipes $264 billion

The Australian dollar fell as a rout in Asian technology stocks erased $264 billion in market value, triggering broad risk aversion ahead of US CPI data and the Fed's rate decision.

"The selloff in semiconductor stocks appears driven more by a sharp deterioration in market sentiment than by any immediate change in fundamentals," Jung In Yun, chief executive officer at Fibonacci Asset Management Global, said.

South Korea's Kospi index plunged 7.89%, triggering a circuit breaker for the eighth time this year after briefly dipping below 6,000 points. Samsung Electronics tumbled as much as 13.4% and SK Hynix slid 14%, accounting for nearly half of the benchmark's weighting. Japan's Nikkei fell 3.86% and the broader MSCI Asia Pacific Index dropped 2.92%, with technology stocks bearing the brunt of the selling.

The selloff raises the stakes for a busy week of earnings and central bank decisions. The Federal Reserve, Bank of Japan and Bank of England all meet this week, while Microsoft, Meta, Apple and Amazon are among more than 170 S&P 500 companies reporting results. Investors are looking for evidence that heavy spending on artificial intelligence — with more than $750 billion in pledged investments — is translating into returns.

The weakness extended across the semiconductor supply chain. The Philadelphia Semiconductor Index fell for a third consecutive day in US trading, with Sandisk, AMD and Nvidia among the worst performers on the S&P 500. The cost of insuring Nvidia's debt against default jumped sharply even as the company participated in AI deals worth over $750 billion.

ASML shares dropped 1.1% in European trading after a report that a Chinese state-backed firm had started mass-producing deep ultraviolet lithography machines, threatening the Dutch company's dominance in chipmaking equipment. The report warned of increased competition that could drive down shares across the semiconductor industry.

In currency markets, the Japanese yen held steady at 163.75 per dollar while the offshore yuan traded near 6.7655 per dollar. Hang Seng futures edged up 0.02%, suggesting a mixed open for Hong Kong.

Oil prices extended their decline, with US crude sliding below $82 a barrel and Brent falling to $87.65, after the US paused its daily strikes on Iran. West Texas Intermediate fell 0.9% to $81.89 a barrel. Bond yields dropped in the US as inflation fears cooled ahead of the Fed's meeting.

The Fed is expected to hold rates steady at this week's meeting, though markets are pricing in one 25-basis-point hike and about a 70% chance of a second by year-end, according to LSEG-compiled data. Any hawkish surprise could exacerbate the selloff in risk-sensitive currencies like the Australian dollar, while softer inflation data might provide relief.

This article is for informational purposes only and does not constitute investment advice.