EM currencies and stocks fall as Fed hike bets and oil prices weigh
EEM•MSCI’s emerging-market stocks index fell 0.9% and its currencies index slipped 0.45% as higher oil prices and expectations of further Federal Reserve rate hikes pushed bond yields higher. The 10-year U.S. Treasury yield reached its highest level since 2007.
1. Emerging markets retreat
Emerging-market currencies headed for their steepest daily drop in six months on Thursday, while stocks also fell as firmer oil prices and expectations of further Federal Reserve rate hikes pushed bond yields higher. The 10-year U.S. Treasury yield reached its highest level since 2007 after a stronger-than-expected purchasing managers’ report revived inflation concerns and a five-year note auction was poorly received.
2. Currencies under pressure
Money markets priced in nearly a 70% chance of a Federal Reserve rate hike at its October meeting. The South African rand fell 0.4% to a seven-week low after the central bank raised its benchmark rate by 25 basis points to steer inflation toward its 3% target. The Indonesian rupiah fell 0.5%, while the Korean won declined 0.3%.
3. Stocks and Turkey
MSCI’s emerging-market stocks index fell 0.9%, weighed by firmer oil prices as the United States and Iran remained far from a deal to end the Middle East conflict. Turkey’s finance minister was set to hold meetings Thursday and Friday about liquidating 131 investment funds worth around $18 billion; the Turkish benchmark fell 1.2%.
