EMERGING MARKETS-Stocks fall over 1%, FX slides on Fed rate hike fears

Emerging markets stocks fell on Friday and headed for their third straight weekly loss, while currencies slipped, after a strong set of U.S. economic data stoked fears of a more aggressive Federal Reserve.

The MSCI’s index for emerging market stocks fell 1.2%, and was on track for its worst weekly losing streak since September. A Labor Department report showed the highest rise in U.S. producer prices in seven months in January as the cost of energy products surged, while the number of Americans filing new claims for unemployment benefits unexpectedly fell last week.

The dollar index surged to a six-week high after the data raised market expectations that more interest rate hikes are in the offing, dragging regional currencies down 0.5% at 0922 GMT. “The Fed raising interest rates above 5% and keeping them at high levels for extended periods of time is clearly weighing on risky assets,” said Piotr Matys, senior FX analyst at In Touch Capital Markets.

“The dollar is broadly stronger, driven by rising U.S. Treasury yields, which reflect the market repricing.” A selloff in China stocks also weighed on the markets, as upbeat U.S. data revived concerns that China’s central bank might delay more easing measures to support the pandemic-hit economy.

South Africa’s rand fell 0.6% against the dollar, set for its fifth straight week of losses, amid broader risk-off moves and the ongoing energy crisis. The Turkish lira hovered near record lows against the greenback in the aftermath of devastating earthquakes earlier this month. The country’s central bank forecasts consumer price growth by the end of 2023 at 35.76%, up from a previous forecast of 32.46%.

It also asked banks to widen the spread for gold and foreign currency transactions to curb foreign currency demand, two sources with knowledge of the matter told Reuters. The Russian rouble fell past 75 to the dollar to a near 10-month low, extending a recent weakening trend sparked by embargoes on Russian oil products and the steady recovery of imports, which has raised the demand for foreign currency.

Russia also plans to stick to a budget deficit of no more than 2% of its gross domestic product in 2023, despite towering spending and slumping energy revenues contributing to a huge shortfall in January. In central and eastern Europe, Hungary’s forint slid 0.9% in early trading but was still headed for its fifth weekly gain against the euro, its best streak since September 2021.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)