Asian markets came under heavy selling pressure on Wednesday, led by technology and semiconductor stocks, as long term bond yields moved higher again and financing costs increased. This brought concerns over the elevated valuations of artificial intelligence stocks back into focus after the strong rally seen across the sector. SoftBank led the losses with a decline of more than 10% following reports that the company plans to issue around 1 trillion yen in bonds, while Renesas fell 9% and Kioxia dropped nearly 13%, pushing the Nikkei 225 down by around 3%.
Losses were even steeper in South Korea, where the KOSPI fell 5.2% as Samsung Electronics dropped 7.5% and SK Hynix lost 10%. Selling pressure also spread to chip stocks in Hong Kong. These moves followed losses in the US technology sector, where Nvidia, Micron and SanDisk declined as investors continued to reprice growth stocks against a backdrop of higher yields and rising capital costs.
Rising yields were the main driver behind the selloff, especially after the US 30 year Treasury yield reached 5.337%, a level not seen since 2007, while the 10 year yield traded near 4.70%. These levels raise the discount rate applied to future corporate earnings and place greater pressure on highly valued stocks, particularly companies linked to artificial intelligence and technology.
Despite continued strong demand for chips and data centres, the market has become more sensitive to financing costs, helping explain the sharp declines in stocks that had posted strong gains over recent months. The Federal Reserve meeting minutes remain a key focus, as any indication that interest rates could stay elevated for longer may renew pressure on growth stocks and support bond yields again.
In the currency market, the US dollar remained close to multi month lows, with the Dollar Index falling to 99.48 as Treasury yields eased to 4.68% for the 10 year note and 5.27% for the 30 year bond. The dollar came under pressure after softer inflation data and unexpected job losses in the United States reduced expectations for further monetary tightening by the Federal Reserve.
The central bank kept interest rates unchanged at 3.50% to 3.75% at its July meeting, but the vote revealed clear divisions among policymakers, making the meeting minutes more important in determining whether the Fed is leaning toward an extended pause or still sees room for another rate increase this year.
Dollar weakness gave several Asian currencies room to recover, but performance was mixed. The South Korean won was the strongest performer as USD/KRW fell to its lowest level since September 2025, while the Japanese yen remained under pressure despite USD/JPY declining to 159.21. Meanwhile, the Indian rupee extended losses for a fifth consecutive session, weighed down by higher oil prices and global bond yields, which increased import and financing costs for the Indian economy.
Brent crude remaining above $91 continues to add inflationary pressure on energy importing economies and makes the performance of Asian currencies more dependent on oil prices and US bond yields. At this stage, markets appear increasingly selective, with currencies linked to the global technology cycle benefiting relatively from a weaker dollar, while currencies that are more sensitive to energy costs and capital flows remain under pressure.
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