Emerging Assets Drop as Rupee, Lira Fall to Record Lows on Fed

  • Turkish currency declined even after surprise rate increase
  • Philippine peso breaches 50 per dollar first time since 2008

The Headwinds Facing Emerging Markets

Emerging-market assets fell as traders increased bets on Federal Reserve interest-rate hikes, curbing demand for higher-yielding investments. India’s rupee and Turkey’s lira dropped to record lows.

Stocks in Indonesia paced declines in developing-nation equities and Vietnam’s dong weakened as the Philippine peso dropped to 50 per dollar for the first time in eight years. The lira erased gains even after the central bank raised interest rates for the first time since January 2014.
 
The dollar traded near a decade high after U.S. economic data showed rising orders for durable goods and improved consumer sentiment, adding to the case for tighter Fed policy. Donald Trump’s U.S. election pledges to boost infrastructure spending have fanned speculation rates will rise, potentially eroding the extra yield investors earn on riskier developing-nation assets.

“The world appears to be divided into the U.S. and the rest of the world from the currency point of view,” said Simon Quijano-Evans a strategist at Legal & General Group Plc in London. “The market is fully pricing in a Fed hike in December.”

The MSCI Emerging Markets Index of stocks fell 0.5 percent at 4 p.m. in New York. A gauge of developing-nation currencies declined 0.1 percent.

Top Movers

  • The shares of Rosneft PJSC, Russia’s largest oil producer, rose after its board approved the biggest ever bond program by a Russian company
  • Turkey’s lira led losses among developing nation currencies
  • India’s rupee tumbled to a record as global funds dumped local assets
  • Indonesia’s 10-year sovereign yields jumped to the highest since March
  • Ghana’s cedi fell to a 10-month low against amid concern a close election result next month may put the government’s fiscal reforms at risk
  • Philippine peso reached 50 for the first time since November 2008
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