Emerging currencies slide on higher oil, strong dollar

Emerging market stocks and currencies fell on Monday, pressured with a strong dollar and rising oil prices with net crude importers bearing the brunt.

The MSCI index of emerging market currencies fell 0.3% because dollar built on last week’s gains colliding with a 16-month high, while oil prices rose by above 1% on Monday as top exporter Saudi Arabia announced a December supply cut.

This hit currencies of net oil importers such as Indian rupee additionally, the Turkish lira.

“The recent rebound in oil prices is a reminder that it’s going to become increasingly a hardship on twin deficit currencies – rupee, rupiah and peso – to smooth currency volatility via rate hikes without hurting the economy, and throughout interventions without depleting reserves,” said Stephen Innes, head of Asia Pacific trading at Oanda.

But, the bounce in oil prices lifted the currency and stocks in Russia – a net exporter of oil – while using the rouble up 0.6% additionally, the Moscow currency markets index climbed by 0.5% aided also by using a delay for the imposition of US sanction on aluminium giant Rusal.

“Oil is improving sentiment to the rouble today there is additionally another driver with the rouble – Rusal sanctions. Some deadlines were extended by US authorities. And we are not seeing any negative news connected with sanctions,” said Vladimir Miklashevsky, a senior economist at Danske Bank.

The Sri Lankan rupee weakened after dollar-bonds fell as President Maithripala Sirisena dissolved parliament on Friday night and called an election for January 5 in a move designed to likely deepen the country’s political crisis.

The Chinese yuan extended losses, after its worst week since July as soft economic data a couple weeks ago showed cooling from the economy, while?SouthAfrica‘s rand was weaker by 0.3% as yield-seeking investors continued to back the dollar.

MSCI’s benchmark emerging equity index was down 0.6%, trading at its minimum this month as exchanges in?South?Korea, India andSouth?Africa?declined.

China mainland stocks , however, shined through, snapping a one-week losing streak boosted by way of selection of stimulus measures, notably the securities regulator making it simpler for businesses to purchase back shares, possible implementation of huge scale tax cuts.

Focus also remains on US Vice-President Mike Pence’s attendance in the Association of?South?East Asian Nations summit today, which could see him provide clarity on US intentions for improving trade relations with China.

“Trade is obviously destined to be important in our environment for Asia, as about a third of global trade goes thru the location, and is also slowing, this means slower incomes growth across the region,” said Robert Carnell, chief economist and head of research at ING Asia.

In Eastern Europe, Romania’s leu touched its lowest since May recently as consumer price inflation slowed in October.