Investors Continue Selling Emerging Markets Even After Rate Hikes

Markets are waging war against central bankers.

After initially rising, U.S. stock futures sold off sharply as selling returned to emerging markets, reversing gains in currencies that were boosted by the Turkish central bank’s sharp rate hike.

South Africa on Wednesday followed Turkey’s rate hike with a half percentage point boost, taking its repo rate to 5.5 percent. Turkey surprised markets with a massive hike, taking its benchmark to 12 percent from 7.75 percent late Tuesday. This came on the heels of a rate hike in India on Tuesday, which helped steady markets ahead of Turkey’s rate decision.

The latest rout comes on a day that the Fed is widely expected to announce it will taper its bond buying program by another $10 billion, taking it to a $65 billion monthly program. Traders say the Fed’s move away from the easy money policy has aggravated the situation in emerging markets and has caused market readjustments across the globe in anticipation of rising U.S. interest rates.

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza