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Kuala Lumpur - Emerging-market assets fell for a second day as traders increased bets on Federal Reserve interest-rate hikes, curbing demand for higher-yielding assets and driving India’s rupee to record lows. Turkey’s lira rebounded after a surprise central bank rate increase.
Stocks in Indonesia led 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. Turkey’s lira strengthened 0.7%, rebounding from a record low, after the central bank raised interest rates for the first time since January 2014.
Russia’s rouble and government bonds advanced as the price of crude oil, the nation’s main export earner, climbed toward $50 per barrel.
A gauge of the dollar against major currencies rose for a third day after US economic data showed rising orders for durable goods and improved consumer sentiment, adding to the case for tighter Fed policy.
Donald Trump’s US 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 US and the rest of the world from the currency point of view,” said Simon Quijano-Evans a strategist at Legal & General in London. “The market is fully pricing in a Fed hike in December.”
Turkey’s lira, the worst performing currency across emerging markets this quarter, had dropped to a record before the central bank’s interest-rate decision. Raising the one-week repurchase rate and the overnight lending rate helped dispel some investor concerns about the monetary authority’s independence from senior government officials, who have called for lower borrowing costs.
India’s rupee tumbled to a record as global funds dumped local 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.
The MSCI Emerging Markets Index of stocks fell 0.3% as of 14:19 after dropping 0.2% on Wednesday. The gauge has now slipped 5.5% since its close on November 8, the day of the US election. The MSCI Emerging Markets Currency Index declined 0.1%.
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The shares of Rosneft PJSC, Russia’s largest oil producer, rose for a fourth day and five-year credit-default swaps on the company’s debt fell for a second day.
The company’s board approved a 1.07 trillion rouble bond programme the biggest ever by a Russian company Indonesia’s 10-year sovereign bonds retreated for a sixth day, sending yields to the highest since March Ghana’s cedi fell to a 10-month low against the dollar amid concern a close election result next month may put the government’s fiscal reforms at risk Philippine peso declined 0.2% to 49.94 per dollar after reaching 50 for the first time since November 2008
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