EM currencies and equities decline further

A sharp sell-off in commodity prices and a rise in US treasury yields put main emerging currencies on track for a weekly loss yesterday, while emerging market stocks hit a 10-day low and looked set to end the week in the red.Tumbling iron ore futures and a plunge in oil prices to five-month lows as Opec and other producers appeared to rule out deeper supply cuts to reduce the world’s persistent crude glut stoked investors’ fears about the health of the global economy.MSCI’s emerging stocks index fell 0.7% in a third day of losses, led by a 1% fall in Hong Kong and India.Russian and Polish equities also slipped.Chinese mainland stocks hit fresh three-month lows and were on track for their fourth weekly loss as concerns over tighter regulations added to investors’ woes.“There are clear signs of a softening of the global business cycle, especially in China and the US,” said Jakob Christensen, head of emerging market research at Danske Bank.“Typically as we move into this phase of a softer business cycle, risky assets like emerging markets perform poorly and volatility increases, including on emerging market FX.”Russia’s rouble, closely tracking oil prices, hit a seven-week low against the dollar before bouncing back and eking out a small gain on the day.The rouble looked on track to weaken 2.5% over the week, however, its steepest weekly loss in over six months.Investors have also questioned whether the central bank’s 50 basis point rate cut last week was too bold, said Commerzbank, ahead of a holiday weekend that will keep Russian markets closed until Wednesday.Copper producer South Africa saw the rand chalk up a small daily gain but the currency was on track for a second week of losses as political tensions continued to weigh.The ruling ANC party has urged President Jacob Zuma to appeal a High Court ruling on Thursday which ordered him to explain why he fired former finance minister Pravin Gordhan in a cabinet reshuffle that led to sovereign debt downgrades.The Turkish lira weakened 0.4% on the day and was poised for a weekly loss.Investors will also watch developments in Nigeria, where the central bank has said it will release more dollars to ease a liquidity crunch and help unify the parallel exchange rates.Across emerging Europe, currencies were slightly stronger or flat against the euro on the day, with the Polish zloty, the Hungarian forint and the Czech crown all on track for weekly gains.Romania’s central bank will announce its latest interest rate decision with policy makers expected to keep interest rates at record lows.