Emerging currencies in longest slide in a year on Fed outlook

[BANGKOK] Emerging-market currencies fell for a seventh day, the longest losing streak since March 2015, as the dollar rallied on the prospect of higher US interest rates.

Malaysia's ringgit slumped to a seven-week low to lead declines and Russia's ruble weakened after Brent crude tumbled 3.8 per cent on Monday. South Korea's won touched its lowest level in seven weeks as data from China and the US added to evidence global economic growth remains subdued. A gauge of emerging stocks rose for the first time in eight days as as oil stabilized and base metals clawed back some of Monday's losses.

Developing-nation assets have retreated in May after rallying in the last four months as data pointed to sluggish growth in the world's biggest economies. The Bloomberg Commodity Index has dropped on five of the previous six trading days, and Brent crude closed at a three-week low on Monday. The Bloomberg Dollar Spot Index was little changed, after a five-day winning streak that was triggered by remarks from several Federal Reserve officials that US borrowing costs may rise as soon as June.

"As the dollar returns to a stronger trend it will certainly affect investor sentiment on emerging markets on concern about fund outflows," said Thanomsak Saharatchai, head of research at KT Zmico Securities Co in Bangkok. "Further declines in oil prices will also have impact on some developing countries that rely on exports of commodities."

The MSCI Emerging Markets Currency Index fell 0.2 per cent as of 9:11 am in London, and has lost 2 per cent in the past seven days. The ringgit lost 1 per cent, headed for its weakest close since March 21, and the won dropped 0.6 per cent. Taiwan's dollar slid 0.4 per cent and the ruble declined 0.7 per cent.

The Philippine peso jumped 0.7 per cent, the most since March 30, after an anti-establishment candidate claimed victory in Monday's presidential election. The nation's benchmark stock index gained 2.6 per cent, the biggest gain since January, after Rodrigo Duterte, the mayor of Davao City, sought to calm markets with a call for "healing" as he seeks to win over Filipinos and investors watching closely how he will manage the economy.

The MSCI Emerging Markets Index rose 0.1 per cent, after losing 5.1 per cent in the previous seven days. Six of the 10 industry groups in the measure advanced. The gauge has gained 0.9 per cent this year and is valued at 11.3 times the 12-month estimated earnings of its constituents. That compares with a multiple of 15.7 for the MSCI World Index, which has fallen 0.7 per cent in 2016.

South Africa's FTSE/JSE Africa All Share Index gained 0.4 per cent, South Korea's Kospi advanced 0.8 per cent, while Turkey's Borsa Istanbul 100 Index rose 0.1 per cent.

Chinese stocks in Hong Kong headed for their first gain in seven days as financial companies advanced. The Hang Seng China Enterprises Index climbed 0.4 per cent, erasing earlier losses. China Minsheng Banking Corp rose the most in three weeks. The Shanghai Composite Index closed little changed after data showed China's consumer prices rose for a third month, while factory-gate deflation narrowed more than expected.

BLOOMBERG