Israel-Iran Crisis: Emerging market currencies feel impact, Index drops to year's low
Israel-Iran Tensions Impact: Emerging-market currencies fell to a new low for the year as the dollar extended gains into a fifth day amid heightened geopolitical tensions and after robust US data boosted bets the Federal Reserve will delay interest-rate cuts. Also Read | Israel vows to respond to Iran's drone attack, US military military assets in Middle East | Top 10 updates The MSCI EM Currency Index dropped 0.2% on Tuesday to the lowest since December.
The US currency got an extra boost in early Tuesday trading after China moved to weaken the daily reference rate for the yuan after sustained dollar pressure. Haven demand for the greenback has also increased after Iran’s attack on Israel pushed conflict between the two countries into a perilous new phase.
Also See Our Markets LIVE blog here “The undesired mix of geopolitics, high for longer rates and volatility in yuan and yen may continue to undermine sentiments in Asia ex-Japan currencies," said Christopher Wong, a currency strategist at Oversea-Chinese Banking Corp. in Singapore.
Also Read | Indian stock market: 9 key things that changed for market overnight - Gift Nifty, US tech stocks selloff to bond yields Stronger-than-expected US economic data has damped bets on Fed rate cuts, suggesting the battle against dollar strength isn’t going to end anytime soon. That has led to an increase in currency intervention across emerging markets, especially Asia, as the dollar's strength piles pressure on officials to act.
Meanwhile, any weakening in China’s managed currency can have an outsized impact as it is seen as an anchor for its regional peers. Most under threat are the currencies of Asian neighbors such as South Korea and Thailand, where China is the number one
. Read more on livemint.com
