Oct 3 (Reuters) – Emerging market stocks slid to a near seven-month low on Tuesday as worries about higher-for-longer U.S. interest rates gained steam, though Hungary’s forint got a lift from a report that the European Union would free up some funding for the country.
MSCI’s index tracking emerging market equities .MSCIEF tumbled 1.0% to its lowest level since mid-March, while currencies .MIEM00000CUS fell 0.2% against the dollar by 8:57 GMT.
Risk sentiment across markets took a dip with U.S Treasury yields hitting 16-year highs on robust economic data and as several U.S. Federal Reserve officials cautioned monetary policy will need to stay tight for a while.
In Asia, Hong Kong’s main stock index .HIS tumbled 2.7% as investors returned to markets following a public holiday, with shares of Evergrande3333.HK jumping 28.1% in volatile trade, after being suspended last Thursday amid news of a probe into the embattled developer’s chairman.
Turkey’s lira TRYTOM=D3 traded at 27.5 to the dollar after data showed annual consumer price inflation in September climbed to 61.53%, just below expectations and rising for a third consecutive month in response to recent tax hikes and lira weakness.
The modest rise in inflation “provides the first signs that the inflation spike is close to levelling off,” said William Jackson, Chief Emerging Markets Economist at Capital Economics in a note.
“But the central bank’s work isn’t over and we still expect a further 1,000bp of interest rate hikes by early next year.”
In central and eastern Europe, the Hungarian forintEURHUF= was up 0.2% against the euro after a report said the European Commission intends to unfreeze funding of about 13 billion euros ($13.61 billion) to the country before the end of November.
The funding had been suspended due to long-running disputes with Brussels.
Poland’s zloty EURPLN= was up 0.1% ahead of a local monetary policy decision on Wednesday, where most economists expect a 25 basis points interest rate cut.
Focus was also on Ukraine after its central bank said it would bring in a more flexible exchange rate from Tuesday, relaxing the official peg it has had throughout the war with Russia in a move to boost the economy. The Ukranian hryvnia UAH= was up 0.9% against the dollar.
Elsewhere, Indonesia’s central bank has intervened in the foreign exchange market to manage the supply and demand of U.S. dollars, an official told Reuters on Tuesday. The rupiah IDR= slipped 0.3%.
(Reporting by Amruta Khandekar, editing by Deborah Kyvrikosaios)
