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Emerging market selloff deepens after Trump’s win

Stock MarketsNov 14, 2016 11:35
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© Reuters. Emerging markets post U.S. presidential election selloff deepens

Investing.com - A selloff in emerging markets currencies, stocks and bonds deepened on Monday amid ongoing uncertainty over how developing economies will fare under a Donald Trump administration in the White House.

Emerging markets have been hit by fears over the prospect of a more protectionist U.S. trade stance, which would be both inflationary for the U.S. and negative for trade-exposed economies.

During his campaign Trump said he would pull America out of the Trans Pacific Partnership trade deal, build a wall on the border with Mexico and branded China a currency manipulator.

Investors expect that Trump's campaign pledges to increase fiscal spending, cut taxes and loosen financial regulation will prompt the Federal Reserve to hike interest rates as economic growth and inflation pick up.

Higher interest rates could lure more investors back to the U.S. and spark an outflow of capital from emerging markets.

A rally in the dollar and a selloff in global bonds on the back of a surge in inflation expectations have also pressured emerging markets.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.77% at 99.76, the highest level since January 29.

Emerging-market currencies were particularly hard hit, with the Mexican peso not far from record lows against the greenback, with USD/MXN at 21.01.

The Turkish lira fell to record lows on Monday, with USD/TRY hitting 3.29, while the Russian ruble hit lows of 66.39, the weakest level since early August.

Meanwhile, China’s yuan continued to slide, hitting its lowest level in seven years.

The yuan has fallen around 0.7% against the dollar since last Wednesday, when it became apparent that Trump had won the U.S. presidential election.

Overnight in Asia, emerging market stocks were sharply lower, with the Philippines PSEi Composite down 1.5%, and Indonesia's JSX Index dropping 2.2%.

The dollar rose more than 1.5% against the Malaysian ringgit while the yield on 10-year government bonds in Malaysia and Indonesia climbed.

Emerging market selloff deepens after Trump’s win
 

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