The Nikkei index in Tokyo fell more than 3% at the opening of trade, while in Sydney the benchmark S&P/ASX200 index was down nearly 2%, slipping below the 6,000-point mark for the first time since early June.
On Wednesday, President Donald Trump said the Fed "is making a mistake" with its campaign of rate increases.
"As uncertainty continues to prevail in financial markets across the world, many investors are staying on the sidelines until more clarity emerges in U.S. Treasury and Chinese markets", said Yasuo Sakuma, chief investment officer at Libra Investments, according to Reuters.
The benchmark ASX 200 has dropped 2 per cent on opening to 5,926, while the All Ordinaries index has slipped a similar amount to 6,034 points.
"This meltdown isn't just a mild case of the sniffles, suggesting the latest sneeze from the US equity market could morph into a global markets pandemic", he added.
"I think the Fed has gone insane", he charged.
American crude headed back below $73 a barrel as Hurricane Michael threatened to slash fuel demand across the U.S. Southeast.
The Chinese economy was already showing signs of weakening, and U.S. tariffs on billions of dollars worth of goods could threaten the country's massive export industries.
A US-led trade war against China has also made investors anxious about the outlook for global growth. Chow said it was unclear whether the Treasury might label Beijing a "currency manipulator" - a status that could trigger penalties - or whether it could be "another pre-text for the next round of tariffs".
There were more signs of tension in the China-U.S. economic relationship. USA officials have accused China of meddling in its midterm elections and stealing trade secrets from its companies through spies.More news: Category 4 Hurricane Michael being felt on Florida coast
Tokyo's Nikkei 225 gave up 3.9 percent to 22,590.86 and the Shanghai Composite index lost 5.2 percent to 2,583.46. The Kospi in South Korea fell 4 percent to 2,139.51. The Dow Jones Industrial Average suffered its worst loss in eight months, falling 3.1 % to 25,598.74.
Despite a booming United States economy, low inflation and low unemployment, investors are concerned about rising bond yields that have been drawing money out of the stock market, and rising USA interest rates.
Shares in Facebook, Amazon, Apple, Netflix and Google's parent company Alphabet - the so-called "Faang" stocks that have driven USA markets to all-time highs recently - all fell in NY trading. The broader S&P 500 fell by 3.3 per cent to 2,785.68, its fifth consecutive day of decline and its worst run since President Trump was elected. The Nasdaq composite, which has a large contingent of technology stocks, was 4.1% lower at 7,422.05.
"It's primarily the cumulative effect of interest rate moves over the past five days and news reports about trade impacting companies", he added. Apple and Amazon, the two most valuable companies in the S&P 500, each had their worst day in two and a half years. Apple slipped by 4.6 percent while Amazon lost 6.2 percent.
Francis Tan, an investment strategist at UOB private bank, believes the markets will likely pick up in the US session.
"The valuation of US stocks, especially tech stocks, is still pretty high and there could be some profit taking actions now", Tan explained.
The dollar rose to 112.34 yen from 112.27 yen late Wednesday.
The euro pushed up to $1.1535 and away from a low of $1.1429 early in the week.
Oil futures fell. USA crude gave up $1.27 to $71.90 a barrel.
Traders work on the floor of the New York Stock Exchange (NYSE) in Manhattan in New York, U.S., October 10, 2018. Brent crude, the worldwide standard, dropped 76 cents to $82.33 a barrel.