Share

Dollar surge weighs on emerging markets

London - The dollar’s gains reverberated through emerging markets as the case for multiple US rate hikes next year strengthened. Copper was set to close at its highest level in more than a year.

India’s rupee and Vietnam’s dong slid to records, while the Philippine peso dropped to its weakest level in eight years. In Turkey, an unexpected interest-rate increase provided only a fleeting respite for the nation’s beleaguered currency, with the lira’s knee-jerk advance dissipating within hours of the decision.

Copper’s surge pulled a gauge of commodities higher for a fourth day, the longest rally in a month. Rosneft PJSC approved a $17bn bond program, the biggest ever by a Russian company as the nation’s largest oil producer refinances debt.

Central banks worldwide are being pushed to take action in the face of the stronger dollar. In Turkey, policy makers attempted to support the nation’s beleaguered currency, while the European Central Bank warned that the risk of an abrupt global market correction on the back of rising political uncertainty has intensified, posing a threat to banks, stability and economic growth.

The market odds of a December rate hike in the US are 100% and traders are adding to bets that Fed Chair Janet Yellen will lead further action in 2017. US equity benchmarks extended records last session before the Thanksgiving holiday.

“The dollar has been really strong in anticipation of Yellen’s move next month and that strength in the US dollar is ultimately going to mean that emerging-market assets would be seen as disadvantaged,” said Nicholas Teo, a strategist at KGI Fraser Securities in Singapore.

Currencies

The greenback advanced 0.6% to ¥113.17 at 14:58, having reached an almost eight-month high. It was little changed at $1.0549 per euro, after surging 0.7% the previous day, when data Wednesday showed a better-than-estimated increase in durable goods orders, and a pick-up in manufacturing.

Turkey’s lira tumbled to a record-low and stocks sank even after the central bank raised interest rates for the first time since January 2014. Policy makers increased the overnight lending rate by 25 basis points to 8.50% and the repurchase rate by 50 basis points to 8%. Economists had predicted no change in either rate. South Africa’s rand also gave up fleeting gains to weaken 0.5%.

The rupee tumbled as global funds dumped Indian assets. The central bank will take appropriate action to deal with the currency’s decline, a government official said earlier on Thursday, asking not to be identified, citing rules. State-run lenders sold dollars, probably on behalf of the central bank, three Mumbai-based traders said, asking not to be named.

A gauge of implied price swings in the euro versus dollar over the next two weeks jumped to its highest level since the aftermath of the UK’s Brexit vote, as traders await the ECB’s December 8 policy meeting. The euro has slid 4.2% against the dollar since the US election amid speculation that the ECB will extend its stimulus, maintaining a policy divergence with the Fed.

The MSCI Emerging Markets Currency Index dropped for a second day, heading for the lowest level since June 27, days after the UK voted to leave the European Union.

Commodities

The Bloomberg Commodity Index, which measures returns on raw materials, was up 0.3%, extending gains to a fourth day, the longest run since October 19.

Copper for deliver in three months rose 2.2% to $5 865.50 a metric ton on the London Metal Exchange in London, heading for the highest close since June 2015, while zinc and lead also posted gains. The LMEX Index of six base metals on Wednesday closed at the highest level in 18 months.

West Texas Intermediate crude was little changed at $48.04 a barrel after retreating 0.2% last session. Iraq’s prime minister said the country will cut production as part of a broader OPEC supply deal, while Russia is seen agreeing to a freeze rather than a reduction.

Gold for immediate delivery dropped as much as 0.7% to $1 180.38 an ounce, the lowest level since February, on expectations of higher rates and a stronger dollar.

Bonds

In Europe, sovereign bonds were broadly higher as ECB Governing Council Member Francois Villeroy de Galhau was quoted by Expansion as saying the central bank was mulling many options for its debt-purchase programme.

They partially reversed a selloff from Wednesday that was fueled by a report that the ECB is planning to lend out securities in an effort to boost bond-market liquidity and reduce shortages in the repurchase market.

France’s 10-year bond yield fell one basis point to 0.77%Portugal led gains in the region, with the nation’s 10-year yield falling four basis points to 3.64 percent.

Indonesia’s 10-year sovereign bonds retreated for a sixth day, sending yields to the highest since March 2.

Stocks

Russia’s Rosneft added as much as 0.7% and five-year credit-default swaps on the company’s debt fell for a second day after the company’s board approved the 1.07 trillion ruble bond program.

The Stoxx Europe 600 Index was little changed, while Japan’s Topix index climbed for a 10th straight day, its longest streak since June 2015. Europe’s top equity market this month, Greece, is giving signs of overheating: A technical indicator hit its most- overbought level since October 2013, meaning that gains might have come too quickly to be maintained.

Banca Monte dei Paschi di Siena climbed as much as 14% amid optimism that shareholders will approve the bank’s plan for a vital €5bn capital increase at a meeting in Siena on Thursday.

Domino’s Pizza Group climbed 3.3% after increasing its UK-store target.

Read Fin24's top stories trending on Twitter:

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.88
+0.3%
Rand - Pound
23.86
+0.2%
Rand - Euro
20.38
+0.3%
Rand - Aus dollar
12.32
+0.1%
Rand - Yen
0.12
+0.2%
Platinum
908.05
0.0%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders