Stocks slide, currencies muted ahead of U.S. inflation data
Emerging market stocks fell 1% on Thursday, their third straight session testing 2020 pandemic-rout lows, while currencies were flat to lower with investors awaiting U.S. inflation data.
The South Korean won led gains among Asian currencies, down 0.5%, while South Africa’s rand lost 0.4%. Turkey’s lira and Mexico’s peso were flat.
Among stocks, most major Asian bourses slipped , as did those of South Africa, Poland and Hungary, Turkey, Russia and some Middle Eastern indexes rose.
After minutes of the U.S. Federal Reserve’s last meeting saw members stressing the need for restrictive policy, September consumer prices data, due at 1230 GMT, is being awaited with interest.
Headline inflation is seen falling year-on-year but rising from the previous month. On Wednesday, data showed U.S. producer prices rose more than expected.
“(Fed) minutes have confirmed what central bankers have recently been repeating tirelessly — that bringing inflation back to the 2% target is the top priority,” said Thu Lan Nguyen, FX and commodity analyst at Commerzbank.
“Although the U.S. dollar has already appreciated significantly in recent days, I still see the risks on the side of a strong U.S. currency… because current inflation levels are so far away from the Fed’s target.”
Emerging market stocks are on course for their worst year since a global financial crisis rout in 2008, as investors worried about central banks’ aggressive policy tightening to tackle inflation and recent recession warnings from the International Monetary Fund and the World Bank.
Rising debt levels and mounting fiscal pressures underscore the urgency for more “orderly debt restructuring” efforts for low-income countries, the IMF said.
EM currencies are on course for their worst year on record.
Against the euro, most central and eastern European currencies made muted moves, although Hungary’s forint marked its fourth straight day of falling to new lows. It hit 433.89 against the euro on Thursday in its eighth straight session of losses – its longest losing streak since March last year.
Hungary’s proximity to the escalating Russia-Ukraine war and worries about energy supplies, rising energy costs and access to European Union funds have seen the forint slump nearly 15% on the year, the worst by a significant margin among regional peers.
Hungary’s central bank left its one-week deposit rate unchanged at 13.00% at a weekly tender on Thursday.
In India, the central bank, which is seeking to curb declines in the rupee after it slid to all-time lows last week, is asking local banks to not build additional positions in the non-deliverable forward market, a move that could lead to volatility in local markets. For GRAPHIC on emerging market FX performance in 2022, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2022, see https://tmsnrt.rs/2OusNdX
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