Asian shares were pinned near five-month lows on Tuesday as concerns that slower growth in China and reduced U.S. monetary stimulus could hurt some emerging economies dependent on exports and foreign capital.
Investors are now focusing on whether the central bank of Turkey, one of the epicentres of the latest rout in emerging markets, could salvage the lira at an emergency policy meeting later in the day.
"I do not necessarily think the world economy will be severely damaged by the latest troubles in emerging economies. But markets are getting nervous," said Ayako Sera, senior market economist at Sumitomo Mitsui Trust Bank.
Japan's Nikkei hit 2 1/2-month intraday low before recouping the losses to trade 0.2 percent above its previous close.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS also briefly dipped to a five-month low, extending a 3.8 percent loss in the past three days and last stood almost flat.
Investors drew some comfort from the news that a Chinese trust firm had reached an agreement to resolve a troubled high-yield investment product, just days away from what could have been a precedent-setting default in China's shadow banking system.
While the agreement alleviated fears that an immediate default could spark a run on similar products, concerns over the rapid expansion of China's shadow banking sector, a key source of financing for local corporations, could fester over the medium-term.
A contraction of demand in China, the world's second largest economy, has repercussions for many emerging economies that have boomed on exports to China, including countries as far as Brazil and Argentina.
Beunos Aires was forced to give up defending the peso last week, pushing the currency to a record low on the black market, while Brazil's real stood near the five-year trough hit in August.
The Turkish lira remained volatile, dropping 0.7 percent to 2.2690 to the dollar in early Asian trade, though it kept some distance from the record low of 2.3900 hit on Monday.
The lira, which has been battered by the corruption scandal that rocked Prime Minister Tayyip Erdogan's government, rebounded from a record low after the central bank called an emergency meeting on Tuesday.
The central bank is expected to raise rates to defend the sagging lira after its decision not to do so last week sent the lira into freefall. Its statement is due at 2200 GMT, midnight in Turkey.
"The market is expecting a rate hike of one percent or more and possible capital controls. Whether their steps can calm markets is one big area of focus," said Masafumi Yamamoto, chief strategist at Praevidentia Strategy.
Elsewhere, the South African rand hit five-year low while the Russian rouble hit an all-time low against the euro on Monday.
Expectations that the U.S. Federal Reserve will scale back its bond buying further have put pressure on risk assets, especially emerging markets dependent on external financing as the Fed kicks off its two-day policy meeting later in the day.
Many expect the Fed to reduce its monthly bond purchase by $10 billion as it did in December.
Although the Indian rupee has softened over the past couple of days, it has kept some distance from a record low hit in August, after stabilising when the Reserve Bank of India tightened credit last year.
India's central bank, which is also holding a policy meeting later in the day, is expected to keep rates on hold.
Disappointing guidance from Apple Inc (AAPL.O) also hit shares of its suppliers in Japan and Korea.
Apple missed Wall Street's target for iPhone sales over the crucial holiday shopping season and offered a weaker-than-expected forecast for this quarter, sending its shares down sharply after the bell.