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Rising Treasury Yields Pressure Emerging Market Currencies

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Feb 17 Reuters Emerging market currencies weakened on Wednesday, extending losses to a second day, as rising U.S. bond yields put the dollar ontrack for its best session in two weeks.

Benchmark tenyear Treasury yields hit a oneyear high to trade near prepandemic levels, as vaccine rollouts and stimulus measures spurred bets of a likely spike in inflation as the global economy recovers from a coronavirusinduced slump.

MSCIs index of emerging market currencies slipped 0.3 and was on course to post its worst session in four weeks, as the dollar rode the yield trade higher.

The extended bond selloff somewhat and temporarily derailed FX momentum and weighed on nonUSD FX, said a team of analysts at Maybank led by Saktiandi Supaat, head of FX research.

That said, we believe procyclical and commoditylinked FX should still benefit if global growth rebound continues to show up alongside smooth rollout of vaccination to other nations.

Turkeys lira slid 0.3 ahead of a central bank meeting due Thursday in which it is expected rates will be kept on hold at 17. The currency has risen about 14 since late November when it began a largely steady move higher as the central bank began hiking rates.

Communication from the central bank indicating a tight monetary policy for some time to come has kept the currency buoyed. In January, the bank stood pat on rate with inflation on an uptrend.

South Africas rand extended losses after Citi took profit in its threemonth bet on the rand…

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