Band Susan Mathew
January 27 (Reuters) – Emerging market stocks fell to more than 14 months on Thursday and currencies were set for their worst session in more than five months, after the US Federal Reserve signaled an interest rate hike in March and a sustained tightening of the Politics.
Further interest rate hikes and a possible reduction in Fed holdings would follow as needed, Fed Chairman Jerome Powell said.
the comments boosted bets on further Fed tighteningnot speculated. Nomura now expects a 50 basis point hike in March, compared to 25 basis points in the markets, and together with BNP Paribas and BofA, now expects more than four hikes this year.
As US Treasury yields hit 23-month highs and the dollar soared, most Asian currencies .MIEM00000CUS collapsed, with the Chinese yuan CNY= slipping 0.7% for its biggest decline since June. CNY/WE/XRF/
But currencies elsewhere in the developing world have fared better.
For bond markets, Fed balance sheet reduction is on the cards, said Kiti Pantskhava, deputy head of research and fixed income at BCS Global Markets.
“Signs are coming from the Fed that it will stop asset buying and start shrinking the balance sheet. This is potentially a bit more painful for emerging markets. It will more likely affect US Treasury yields in the long run. term and longer-term papers all over the world.”
The Russian Ruble RUB= gave up early losses to trade 1.2% higher. It was last at 78.5 to the dollar after breaking the 80 mark on Wednesday. Ukrainian hryvnia UAH= hit new four-year lows and last traded down 0.2%.
The United States has carved out a diplomatic path to meet Russian demands in Eastern Europe, Washington said, as Moscow held security talks with Western countries and stepped up its military buildup near Ukraine with new exercises.
The South African Rand ZAR= rose 0.6% ahead of a central bank meeting later in the day when investors expect a 25 basis point hike to 4% in the key interest rate as inflation rises.
As the rising dollar put pressure on the euro, the Czech koruna EURCZK= rebounded 0.4% against the euro.
The Turkish Lira TRY= fell 0.1% after the central bank raised its annual end-of-year inflation forecast to 23.2% from 11.8% three months ago.
The Emerging Markets Stock Gauge .MSCIEF fell 1.6% as Chinese real estate and tech majors slid along with Alibaba 9988.HK down 7.2%.
China Evergrande Group 3333.HK collapsed after the developer’s barely detailed roadmap for restructuring left investors unsatisfied. A report on Thursday said Beijing was considering dismantling Evergrande.
The broader emerging markets stock index is down around 4.2% so far this week, and is set to see its worst weekly performance since August.
For the 2021 Emerging Markets FX GRAPH, see http://tmsnrt.rs/2egbfVh
For the GRAPH on the performance of the MSCI emerging index in 2021, see https://tmsnrt.rs/2OusNdX
For TOP NEWS in emerging markets
For the CENTRAL EUROPE market report, see EEC/
For the TURKISH market report, see .IS
For the RUSSIAN market report, see UK/RUB
(Reporting by Susan Mathew in Bengaluru; Editing by Shailesh Kuber)
(([email protected]; +91-80-6287-2704;))
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.