Asian equities kicked off the week with sharp losses as emerging markets remained under pressure on fears over a tightening in U.S. monetary policy and credit conditions in China.
Investors took their cues from Friday's rout in global markets when emerging-market currencies from Turkey to Argentina took a beating ahead of Tuesday's Fed meeting. All three major U.S. indices closed down 2 percent on Friday and the pan-European FTSEurofirst 300 Index also closed 2 percent lower.
(Read more: Are emerging marketson brink of another crisis?)
"The EM currency selloff is causing a contagion effect where Asian markets are opening lower. The question is whether the selloff in the EM countries, Turkey, Ukraine and Argentina will have a sweeping effect on the others such as EM Asian countries. There are groups within the EM space that have current account surpluses and demand for their goods which will weather this storm better," wrote Kelly Teoh, market strategist at IG in a note.
Meanwhile, a Forbes report that the People's Bank of China has halted bank cash transfers ahead of the upcoming Lunar New Years holiday sparked fears of a nation-wide liquidity crunch.
Emerging markets in focus
In Thailand, the SET index lost 2 percent, while the hit a new one-month low against the greenback after violence erupted in Bangkok on Sunday as anti-government protesters in increased their efforts to disrupt advance-voting for next week's election.
(Read more: Who pulled the trigger on emerging markets?)
Malaysian shares fell 1.3 percent, while the hit a new four-year low against the dollar. In the Philippines, the benchmark index lost 1.7 percent and the peso hovered near Friday's four-year low against the greenback.
Nikkei 2.5% lower
Japan's benchmark index closed at a two-month low, extending Friday's sharp 2 percent fall, after the yen briefly hit a new seven-week high at 101.77 per dollar in early trade. As global risk appetite fell, investors bought into safe havens like the Japanese currency.
Disappointing data also weighed on sentiment. The economy recorded a record trade deficit for 2013 due to a weaker currency and higher fuel import costs, which saw imports gain an annual 24.7 percent in December compared to a 15.3 percent annual gain in exports.
China shares sink
China's benchmark Shanghai Composite eased 1 percent while Hong Kong shares tumbled to a four-month low after Forbes reported that the People's Bank of China halted bank cash transfers.
"It depends whether or not these halted cash transfers also apply to domestic banks. If it did, there's a number of questions you'd have to to raise. Are there really enough liquidity issues or did somebody just forget to print enough money? If it doesn't apply to domestic banks, it may be a marginal or isolated issue," said Tony Nash, vice president of IHS.
(Read more: Are China shadow banking woes exaggerated?)
ICBC shares in Shanghai fell over 1 percent following reports that it may be close to buying a controlling stake in Standard Bank's London commodities and forex business.
Kospi falls 1.6%
South Korean shares tracked Asia-wide declines to close at a five-month low while the hit a four-month low as investors shrugged off data that showed consumer sentiment hit a three-year high in January. Blue-chip Hyundai Motor closed down 2 percent while Samsung Electronics fell over 1 percent.
Markets in Australia were closed for a public holiday.
— By CNBC.com's Nyshka Chandran. Follow her on Twitter @NyshkaCNBC