EMERGING MARKETS-Stocks hit 28-month lows on Fed outlook; cenbanks in focus


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South African Zenbank decision due 1300 GMT

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Turkish Zenbank decision due 1100 GMT

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Brazil holds interest rates after 12 consecutive rate hikes

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Indonesia hikes rates for second straight month

(Adds details on broader emerging markets; updates prices)

By Anisha Sircar and Amruta Khandekar

22 September (Reuters) – Emerging-market currencies and stocks fell on Thursday as the dollar rose after the Federal Reserve’s aggressive view of US interest rates, with investors focused on a range of other rate decisions due on the day .

The Fed hiked interest rates by 75 basis points (bps) for the third time on Wednesday, forecast to hike rates further and faster than investors had expected.

China’s onshore yuan closed at a 27-month low of 7.08 per dollar, while broader EM currencies fell 0.4% for the second straight day.

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“The message was more hawkish than expected, so the market is absorbing the information and you can see volatile sessions through the end of the week,” said Cristian Maggio, head of portfolio and ESG strategy at TD Securities.

Shares fell 0.9% to their lowest since May 2020, following global risk aversion as the dollar surged to a fresh two-decade high.

Emerging market equities are down more than 25% so far this year and are poised for their worst year since the 2008 financial crisis as markets digest the deteriorating global growth outlook on the back of rising inflation, aggressive tightening cycles and rising geopolitical risks.

The South African rand rallied 0.6%, with investors eyeing a likely 75 basis point hike by the South African central bank to bring inflation back within the 3%-6% target range.

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Turkey’s central bank’s decision is also due later in the meeting, with analysts expecting the bank to keep rates on hold at 13% after surprising with a rate cut last month.

“The direction of travel is towards higher interest rates, but cuts are looming in Turkey, which would be a senseless decision. It would be even harder to understand such a decision today, when inflation has crossed the 80% mark,” Maggio added.

The lira was trading at 18.3 per dollar.

Meanwhile, Hong Kong raised interest rates by 75 basis points to 3.5% in its first rate hike since September 2018, while the Philippine central bank hiked rates by half a percentage point, as expected.

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Indonesia surprisingly hiked rates by 50 basis points, while Taiwan hiked rates by 12.5 basis points, reflecting ongoing inflation concerns.

The rupiah erased most of the losses earlier in the day, slipping 0.1%, while the Philippine peso fell 0.5%.

Brazil’s central bank left interest rates unchanged on Wednesday, as expected, after 12 consecutive hikes.

Other countries’ central banks expected to announce decisions on Thursday also include Egypt and Paraguay. For a 2022 Emerging Markets FX performance CHART, go to http://tmsnrt.rs/2egbfVh. For a 2022 MSCI Emerging Index performance CHART, go to https://tmsnrt.rs/2OusNdX

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(Reporting by Anisha Sircar in Bengaluru; Editing by Uttaresh.V)



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