The legislation would damage China's relationship with the United States if it becomes law, China's foreign ministry said on Wednesday, adding to the stress of already difficult trade negotiations between Washington and Beijing.
"Final passage of the bill would draw the ire of the Chinese government and probably reduce any chances of a US China trade deal, even a mini one," said MUFG Bank in a report.
"This outcome would be negative for financial markets and have more negative implications for global trade, particularly Asia-ex Japan."
Hong Kong has been rocked by massive marches and at times violent protests involving teargas, petrol bombs and live rounds, over concerns Beijing is tightening its grip on the city and eroding democratic rights.
Beijing rejects the charge and accuses Western countries, like the United States and Britain, of stirring up trouble.
Also weighing on sentiment was waning optimism about a breakthrough in US-China trade negotiations with earlier news about both sides reaching a first phase of a new deal failing to yield any concrete details.
Bloomberg reported that China would struggle to buy $50 billion of US farm goods annually unless it removes retaliatory tariffs on American products, which would require reciprocal action by US President Donald Trump.
China's yuan fell 0.2% on Wednesday after its central bank set the midpoint at its weakest level since Sept. 12, 38 pips lesser than Reuters' estimate of 7.0708.
"This USDCNY fix was telling, as it serves to reinforce the message of potential retaliation should the US Congress continues to act in support of Hong Kong protesters," Maybank said in a note.
The Indian rupee also dropped on worries over its economy after the International Monetary Fund (IMF) cut its growth projection to 6.1% from 7% on concerns over corporate and regulatory uncertainty.
The US-China trade war will cut 2019 global growth to its slowest pace since the 2008-2009 financial crisis, the IMF warned, but said output would rebound if their duelling tariffs were removed.
The South Korean won lost 0.24% against the dollar after its central bank cut its policy interest rate in efforts to prop up the slowing economy and flagged the likelihood of further easing.
The Malaysian ringgit fell on worries that India, the biggest buyer of Malaysian palm oil so far in 2019, could raise import taxes or enforce other measures to curb imports from Malaysia.
India's government was angered after Malaysian Prime Minister Mahathir Mohamad said last month at the United Nations that India had "invaded and occupied" Jammu and Kashmir and asked New Delhi to work with Pakistan to resolve the issue.
The Philippine peso and Indonesian rupiah also fell sharply on the day.