Latin American assets were also swept up in the global selloff, with MSCI's index tracking regional currencies down 1.1% and the stocks equivalent off 1.8%.
Colombia's peso slid 2.3% to its lowest level in over two months, set to mark its steepest daily decline in over a month.
While the currency has been the best performer among its peers since the start of 2025, investors fear a hawkish Fed could weigh heavily given Colombia's focus on economic recovery and need for spending following a recent earthquake.
"If indeed the Fed accelerates the pace of hiking, that's eventually going to hurt the Colombian peso in a big way, because based on the earthquake and needing to spend money in economic recovery, they don't want to raise rates a whole lot," added Perez.
Analysts at BofA Global Research said Colombia's new administration has the right diagnosis of the country's fiscal challenges, after recently upgrading their rating on its external debt.
Currencies in Chile, Brazil and Mexico all weakened over 1% against the dollar. The real and the Mexican peso were set for their steepest daily falls in months.
Equities in the region fared slightly better. Brazil's Ibovespa lost 1.2%, with declines contained by a 2.5% gain in energy giant Petrobras. Traders remain cautious on Brazilian assets given the uncertainty around next month's presidential election.
Brazil's central bank monetary policy director Nilton David said monetary policy has been producing the intended effects and that smooth, predictable rate moves were the best response to current uncertainty.
Stocks in Mexico were down 0.2%. Argentinian stocks lost 1%. The Colombian benchmark gained 0.8%, supported by a 1.3% rise in Ecopetrol.
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