Asian markets are careening toward their worst month since the Covid pandemic began, hit by a mighty US dollar and rising global recession fears. The MSCI Asia ex-Japan Index — which captures 10 major markets across Asia, excluding Japan — has fallen 12.8% so far this month, on track to post the biggest drop since March 2020, when the Covid-19 pandemic had wreaked havoc on global markets. The index is also set to end the third quarter down nearly 14%. Among major stock markets, Hong Kong and South Korea have had the worst month so far, down 14% and 12% respectively. For the quarter, the Hang Seng\n \n (HSI) Index has tumbled 21% so far, headed toward its worst quarter in two decades, according to Refinitiv. Concerns about a global recession and hawkish policies by central banks around the world have weighed on investor sentiment. The US dollar surged to a fresh two-decade high on Wednesday against a basket of major counterparts, boosted by the Fed’s policy tightening. The soaring greenback has sparked further fears of capital outflows from Asia’s emerging markets. The Chinese yuan hit a record low of 7.2674 against the dollar on the offshore market earlier this week. It rebounded on Thursday after reports of possible central bank intervention. The onshore yuan, which trades in the tightly managed domestic market, bounced back on Friday to 7.11. But the offshore yuan, which trades more freely overseas, fell again on Friday. It traded at 7.108 per dollar around 1:15 a.m. eastern time. The Japanese yen and the Indian rupee also hit all-time lows this week. “The US dollar’s one way upward journey continues to drive safe-haven flows and keep concerns on Asian equities elevated,” said Manishi Raychaudhuri, head of Asia-Pacific Equity Research at BNP Paribas Securities in a research note this week. “Foreigners continued to sell Asia equities,” said Citi analysts in a separate report on Friday. They noted that Taiwan, Japan, India, and South Korea have seen nearly $5 billion in total foreign outflows this week. Nevertheless, Raychaudhuri expects some silver linings for Asia. “Some tailwind for Asian equities is coming in the form of post Covid reopening – in Hong Kong, Japan, Taiwan and potentially in China,” he said. There is also some good news from China this week. On Friday, China’s official manufacturing purchasing managers’ index showed the country’s factory activity unexpectedly grew in September, boosted by recent stimulus measures and a fading heat wave, according to a statement by the government. The PMI rose to 50.1 in September, returning to expansion territory after contracting for two straight months.