Emerging Stocks and Currencies Fall After Fed and US GDP

A gauge of emerging-market currencies extended a rout to a record low led by the Russian ruble and stocks fell after U.S. economic data fueled speculation the Federal Reserve will raise interest rates sooner than later.

South Africa’s rand sank 1.3 percent, while the lira depreciated to its lowest level ever on a closing basis as Turkey’s central bank said it was evaluating a move to a simplified single-rate policy. The ruble lost 1.6 percent. Samsung Electronics Co. sank to an eight-month low in Seoul, while China’s Shanghai Composite Index slid 2.2 percent.

A gauge tracking 20 currencies slipped 0.5 percent at 1:46 p.m. in London. The MSCI Emerging Markets Index slid 0.6 percent to 894.86, set to extend July losses to 8 percent, the most since May 2012. The U.S. economy expanded at a faster pace in the second quarter, eking out a gain at the start of the year and illustrating gradual improvement consistent with the Federal Reserve’s view. Officials, considering when to start raising rates in 2015, concluded yesterday the U.S. is making progress.

“The rate hike is traditionally negative for emerging markets because it curbs the availability of credit and because it strengthens the dollar,” Joseph Dayan, the head of markets at BCS Financial Group in London, said by e-mail. “A U.S. rate hike this year is clearly being priced in. The only question is whether it will happen in September or in December.”

via Bloomberg

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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