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Emerging market shares and currencies fell to their lowest in a week on Friday, tracking a global downturn in sentiment after the US Federal Reserve reaffirmed its stand on tightening monetary policy, strengthening the dollar.
A string of rate hikes by the Fed has sucked money out of emerging markets this year, and, with another rise priced in for December, currencies across the developing world are likely to weaken further. “It is generally a bit of a risk off day today. Markets were expecting a hike in December and there hasn't been any significant shift in their (Fed) stance,” aid Paul Fage, senior emerging markets strategist at TD Securities. “EM is going to take its cue from what euro/dollar is doing,” added Fage. The euro was 0.26 per cent lower against the dollar.
The emerging market currencies index was down 0.5 per cent, on track for its worst day in over a month with the Turkish lira leading losses, down 0.8 per cent after the Turkish treasury cancelled bond issues for next week due to savings measures. The South African rand also weakened, down 0.7 per cent, giving back gains from earlier this week, as investors took profits and awaited the next market catalyst.
The MSCI's benchmark emerging equity index fell 1.5 per cent with Chinese equities falling for their fifth-straight session.
Over the week, mainland China stocks were weighed down by a mix of weak data, rising pressure on financial companies and concerns of a new board in Shanghai disrupting the already weak A-share market amid looming trade tensions with the US.
Hong Kong faced its worst intra-day fall in over two-weeks, down 2.4 per cent. Stocks in Russia declined more than one percent led by energy stocks, while Johannesburg's blue chips fell for the second consecutive day. The Polish zloty was on pace to post its biggest weekly decline since late September, while Hungary's forint clocked weekly loses for a second straight week.
Hungarian Prime Minister Viktor Orban on Friday said the country must be cautious about adopting the euro and should remain open towards other parts of the world. The Czech Koruna fell 0.2 per cent as data showed the consumer price rise in October to be below forecast but in line with the central bank's target.
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