Asian markets plunge; dollar dips to 12-year low

HONG KONG -- The U.S. dollar plunged below 100 yen Thursday for the first time in more than 12 years, dragging Asian stocks down with it.

In Tokyo, the benchmark Nikkei 225 stock index skidded 427.69 points, or 3.3%, to 12,433.44. Plunging head first were shares of exporters such as Toyota (down 3%), Honda (4.4%) and Canon (4.3%). The dollar dipped to 99.75 yen in Asian trading — first time it's sunk below 100 yen since November 1995 — before bobbing back to close above 100. A stronger yen makes Japanese-made products more expensive in the U.S. market and shrinks dollar earnings from the U.S. when they're brought home to Japan as yen.

"It could do a lot of psychological damage in the short term and will hurt Japan's growth going forward," says Chi Lo, research director at Ping An of China Asset Management in Hong Kong. Lo says Asian markets are also jittery about the health of the U.S. economy and stock market. "The market is very volatile. It all depends on the U.S. economic situation. (Restoring calm) could take another six months, if not longer."

In Hong Kong, the Hang Seng index tumbled 1,121.12 points, or 4.8%. Shares fell 2.6% in South Korea, 2.6% in Taiwan, 4.5% in Indonesia, 3.8% in Singapore and 2.5% in Malaysia. Airline stocks skidded on rising oil prices: Cathay Pacific shares nosedived 4.5% and China Southern Airlines shares dropped nearly 10%.

"It's going to be a volatile and difficult year," Lo says.

Oil futures hit a trading record above $110 a barrel overnight and were at $109.80 midafternoon in Singapore.

Contributing: wire reports