Taiwan's currency and stock market both dropped sharply as foreign investors pulled money out, a bad day for local investors and a warning sign before US inflation data lands.

• The Taiwan dollar fell for a second straight day, with trading volume jumping to unusually high levels.
• Taiwan's stock index dropped more than 750 points as foreign investors sold heavily and moved cash out of the country.
• The cause is US inflation: producer prices came in hotter than expected, pushing up bond yields and the dollar.
• Traders now put the odds of a Fed rate hike next week at about 70%, up sharply after the inflation data.
• Other Asian currencies fell too, with the Japanese yen and Korean won both weaker against a stronger dollar.

Outlook: Tonight's US consumer price report and next week's Fed and Bank of Japan decisions will set the direction, and the Taiwan dollar could weaken further on Monday.