Hong Kong: Asian shares fell sharply on Thursday after weak US economic data rekindled investor worries about growth, while hedge funds sold risky assets, lifting the yen and supporting the dollar.

Asian investors were unnerved by a surprise drop in US home sales last month, which followed a decline in consumer confidence, highlighting risks to a recovery in the world’s biggest economy.

Hitting a low: A man checks his laptop in front of a monitor showing stock indexes in Taipei. Taiwan shares closed down 2.37%. Sam Yeh / AFP

“Everybody’s been calling for a correction but I think the speed and volume of what we’re seeing has caught the market by surprise," said Ben Potter, a research analyst at IG Markets in Australia, where shares tumbled 2.4%.

“There has been a big change in underlying sentiment which has triggered faint alarm bells."

High-yielding Australian and New Zealand currencies fell to three-week lows and Indonesia’s central bank was seen in the market for a second day to support the rupiah.

Currency traders said hedge funds, whose flight from risky assets had aggravated a sell-off in Latin American markets on Wednesday, were seen taking profits on Asian investments ahead of their business year-end in November.

Short-term speculators were also pocketing gains. However, losses were restrained compared with Wednesday’s 5% slump in the MSCI’s Latin American stock index.

The New Zealand dollar came under additional pressure after the central bank vowed to maintain record-low rates until at least July.

The Australian dollar—which has climbed about 40% against the dollar since March—hit $0.8942 at one point, its lowest point in three weeks, while the rupiah hit a one-month low at 9,700 to the dollar. It is still Asia’s best performing currency this year, up 13%.

The yen’s strength added pressure on shares of exporters in Japan, driving the Nikkei index down 1.8% and below the 10,000 points mark for the first time in three weeks. The yen rose to as high as 90.25 to the dollar before retreating towards 90.70, not far from Wednesday’s levels.

Foreign investors were pulling out of South Korea’s stock market, which saw the biggest net selling by foreigners this year as the benchmark Kospi Index fell 1.5%.

Asian stocks have been among the strongest performers this year though and each pullback has been taken as buying opportunity to play the Asia growth story.

Resources stocks were hit by falling commodity prices with Australian mining giant Rio Tinto sliding 4.9%.

Australian bond futures rallied on safe-haven inflows and as investors pared bets for a sharp rate rise next week. Three-year bond futures were 0.160 points higher at 94.81.

Oil prices steadied at above $77 a barrel, pausing from the previous session’s decline of 2.6%, as investors waited for more economic data to gauge the pace of economic recovery in the US.

In Hong Kong, shares in PetroChina slid 4% after disappointing third-quarter results from the world’s second most valuable oil and gas producer.

Key indexes in Hong Kong and China finished at multi-week lows after falls of at least 2% each, with Chinese banks hit by worries about a possible interest rate rise in the mainland.

Taiwan stocks fell 2.4% to a one-month closing low with property shares plunging as Taiwan’s central bank urges banks to take note of risk management on mortgage loans.

Japan Airlines bucked the slide in Japanese shares, rising 2.7% ahead of an announcement by the government on a plan to restructure the struggling carrier. Japanese electronics giant NEC Electronics Corp. tumbled 8.3% after reporting on Wednesday a far bigger quarterly loss than a year ago.

Adrian Bathgate in Wellington contributed to this story.