LONDON Dec 15 Emerging equities fell 1.4
percent and currencies slipped against the dollar after the U.S.
Federal Reserve suggested a brisker pace of monetary tightening
next year, with only the rouble bucking the weaker trend.
MSCI's emerging market index posted its biggest
fall in more than a month, with bourses across Asia
, Russia, South Africa and Greece
While the Fed's 25 basis-point interest rate rise had been
priced in, investors were rattled by policymakers signalling
three hikes in 2017 as the bank adapted its outlook to the
incoming administration of President-elect Donald Trump and its
promises of tax cuts, spending and deregulation.
The dollar galloped to a 14-year high in the wake of
the Fed meeting. The broader reaction was mixed, however.
"Markets got a little bit spooked...now the Fed is
suggesting three hikes, but you have to take this with a pinch
of salt," said Luis Costa, emerging markets strategist at Citi.
"Back in December 2015, the dot plot showed 4-5 hikes and we
have had one hike this year, so there's a tendency for the FOMC
to deflate the dot plot as we go."
South Africa's rand weakened more than 1 percent
against the dollar to its weakest level this week in its third
day of losses.
The Mexican peso, a lightning rod for emerging market
sentiment in the wake of the U.S. election, slipped 0.5 percent
to its weakest level in nine days.
However, Russia's rouble strengthened nearly 1
percent, lifted by a rise in oil prices. Investors also
like the rouble because it is backed by one of the highest real
interest rates in emerging markets.
Turkey's lira gained 0.6 percent as an adviser to
President Tayyip Erdogan said rumoured capital controls were
"out of question" and latest data showed the country recorded a
surplus of 10 billion lira ($2.85 billion) in November thanks
to a tax amnesty.
The lira is seen as one of the most vulnerable emerging
currencies and analysts note Turkey's reluctance to raise
interest rates, in contrast with others such as South Africa and
"EM central banks need to provide sufficient carry to ensure
attractiveness of their currency. Any consideration about a
cooling or even weak real economy would risk getting punished by
the FX market," Commerzbank told clients, highlighting Turkey as
"Those EM central banks which ignore the paradigm shift in
US rates and pretend that business as usual will suffice, are
now the most vulnerable."
South Korea held interest rates steady at a record low of
1.25 percent, sitting tight in the face of a political crisis at
home and Indonesia is also expected to do so.
Mexico is expected to follow the Fed and raise interest
rates for the fifth time this year.
Emerging Markets Prices from Reuters
Equities Latest Net Chg % Chg % Chg
Emrg Mkt Indx 860.56 -12.20 -1.40 +8.36
Czech Rep 906.03 +3.01 +0.33 -5.26
Poland 1924.38 -10.49 -0.54 +3.51
Hungary 31320.83 -53.45 -0.17 +30.94
Romania 6991.77 -17.74 -0.25 -0.18
Greece 608.08 -11.11 -1.79 -3.69
Russia 1134.63 -14.29 -1.24 +49.88
South Africa 43802.84 -248.86 -0.56 -4.35
Turkey 77022.34 +141.50 +0.18 +7.38
China 3118.32 -22.21 -0.71 -11.89
India 26519.56 -83.28 -0.31 +1.54
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 27.00 27.01 +0.03 -0.02
Poland 4.44 4.43 -0.19 -4.16
Hungary 313.65 313.66 +0.00 +0.32
Romania 4.52 4.52 -0.02 +0.04
Serbia 123.46 123.38 -0.06 -1.61
Russia 61.50 62.12 +1.01 +18.61
Kazakhstan 335.10 331.91 -0.95 +1.61
Ukraine 26.22 26.32 +0.38 -8.65
South Africa 14.08 13.92 -1.12 +9.85
Kenya 102.25 102.10 -0.15 -0.05
Israel 3.84 3.82 -0.39 +1.31
Turkey 3.51 3.53 +0.48 -17.00
China 6.93 6.90 -0.36 -6.29
India 67.81 67.45 -0.53 -2.38
Brazil 3.37 3.37 +0.00 +17.52
Mexico 20.58 20.46 -0.56 -16.56
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 362 -1 .44 7 31.78 1
All data taken from Reuters at 10:09 GMT.
Currency percent change calculated from the daily U.S.
close at 2130 GMT.
For GRAPHIC on emerging market FX performance 2016, see tmsnrt.rs/2e7eoml
For GRAPHIC on MSCI emerging index performance 2016, see tmsnrt.rs/2dZbdP5
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see )
($1 = 3.5101 liras)
(Additional reporting by Claire Milhench)