EMERGING MARKETS-Currencies touch 2-month low as dollar rallies on Fed rates prospects

"With inflationary pressures lingering, the currency falling sharply and expectations of a rate cut by the US Federal Reserve being pushed back, the prospect of an early rate cut by the Bank of Korea (which today left interest rates unchanged at 3.5%) has fallen sharply," Gareth Leather, senior Asia economist at Capital Economics, said in a note. Peru's central bank, meanwhile, cut its benchmark interest rate to 6.00% on Thursday, from a previous rate of 6.25%.

Emerging market currencies eased on Friday, tracking global risk-off sentiment as investors scaled back bets for early Federal Reserve rate cuts this year after a red-hot U.S. inflation print this week.

A resurgent dollar, pushed the emerging market currencies index 0.2% lower to its lowest level since February. Denting investor appetite for riskier emerging market assets, the dollar hovered near a five-month high after stronger than expected consumer price data mid-week and commentary from U.S. central bank officials saying there is no rush to cut interest rates

Many Asian markets were closed for public holidays for parts of this week and trading volumes were thin. The MSCI index for emerging market stocks shed 0.9% and was on track to end a volatile week around flat.

In the week to Wednesday, investors flocked to emerging market debt for a second straight week of inflows, while outflows resumed from emerging market stocks, according to a note by Bank of America. The Shanghai Composite index and China's blue-chip CSI300 index closed 0.5% and 0.8% lower, respectively, on Friday. Both indexes also ended the week lower, dragged down by real estate stocks and investors worried about the state of the world's second largest economy.

Customs data on Friday showed China's March exports contracted sharply, while imports also unexpectedly shrank, highlighting the difficult task facing policymakers as they try to bolster economic recovery. China's yuan was steady, after hitting a five-month low on Thursday, as the central bank's strong guidance for the currency offset pressure from a firm dollar.

South Korea's KOSPI slid 0.9% and Singapore's Straits Times Index fell 0.3%. Central banks in both countries opted to keep policy unchanged earlier on Friday. "With inflationary pressures lingering, the currency falling sharply and expectations of a rate cut by the US Federal Reserve being pushed back, the prospect of an early rate cut by the Bank of Korea (which today left interest rates unchanged at 3.5%) has fallen sharply," Gareth Leather, senior Asia economist at Capital Economics, said in a note.

Peru's central bank, meanwhile, cut its benchmark interest rate to 6.00% on Thursday, from a previous rate of 6.25%. Elsewhere, Britain, Germany and Russia on Thursday urged countries in the Middle East to show restraint and Israel said it was preparing to "meet all its security needs" in a region on edge over an Iranian threat to strike Israel.

HIGHLIGHTS: ** China c.bank set to leave policy rate unchanged

** Vietnam c.bank to increase gold bar supplies to stablise market ** Indian voters want jobs, price reduction; cheer new Hindu temple, survey shows

 

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