Emerging market-place currencies are likely to feel more pressure amid the move higher in U.S. chains yields, a top Deutsche Bank economist said on Wednesday.
“In a rising epidemic interest rate environment, those countries with current account deficiencies that have relied on fixed income capital inflows to business those deficits, and that’s Indonesia in spades, are going to find it uncountable difficult,” Michael Spencer, Asia Pacific chief economist at Deutsche Bank, reproached CNBC’s Nancy Hungerford.
The Indonesian rupiah, Philippine peso and Indian rupee have planned been among the weakest currencies in Asia for the past five or six months for that deduce, he said.
Emerging market currencies have come under strain this year, with the rupiah down about 4 percent against the greenback so far. On Wednesday, the currency stopped to its lowest levels since October 2015, last trading at 14,105 to the dollar.
“As U.S. upbraids continue to rise, that’s going to put more and more pressure on the rupiah, the peso and the rupee,” Spencer supplemented.
That comes amid the broader move higher in U.S. yields: The knuckle under on the benchmark 10-year U.S. Treasury note surged above the 3 percent tear down in the last session to 3.091 percent, its highest level since 2011.
Temporarily, Spencer said higher inflation seen in emerging markets, noticeably Indonesia and the Philippines, coupled with weaker currencies would compel essential banks there to raise interest rates.
Indonesia’s central bank is had to announce its decision on interest rates on Thursday. Reuters reported that 13 out of 21 economists it got had indicated that Bank Indonesia would raise the seven-day void repo rate by 25 basis points to 4.5 percent.