The dollar climbed to a six-month high against emerging-market currencies as signals the U.S. economy is improving bolstered the case for the Federal Reserve to raise interest rates for the first time since 2006.
Currencies of developing countries fell for a third day and volatility rose as unrest in Hong Kong damped risk appetite. Brazil’s real touched the weakest in almost six years after a poll showed President Dilma Rousseff widened her lead over opposition candidate Marina Silva. The U.S. dollar headed for its biggest monthly gain since 2012, while New Zealand’s currency reached a 13-month low.
“Developments in Hong Kong have definitely caught the market’s attention; it’s helping drive the risk-off sentiment,” said Shaun Osborne, chief currency strategist at Toronto-Dominion Bank, in a phone interview. “The dollar’s strength is starting to endanger some of the commodity currencies that have done quite well in the quantitative-easing environment.”