(Bloomberg) -- Emerging-market stocks fell to the lowest level since March as a strengthening dollar and elevated US yields damped investor appetite for riskier assets.
Traders are wary of taking on riskier bets in emerging markets amid rising expectations rates will stay higher for longer in the US, or even increase.
The flight to safety sent MSCI Inc.'s gauge of developing-nation shares toward its second month of losses, while a basket of currencies traded at the lowest level in two weeks. The currencies of eastern European countries in the euro's orbit have been especially hit by the dollar's strength.
Federal Reserve Bank of Minneapolis President Neel Kashkari said he expects the US central bank will need to raise interest rates one more time this year if the economy is stronger than expected.
“The appreciation of the dollar across the board is continuing on the back of hawkish remarks by Fed members, who stressed again that US rates are likely to remain on hold for a long period of time,” UniCredit analysts wrote in a note.
Hungary's central bank will likely cut its key interest rate by a full percentage point for a fifth month at a meeting Tuesday. The easing is expected to go ahead even as the forint has weakened in recent sessions and the central bank in Budapest spars with the government over Hungary's deteriorating finances, the outlook for inflation and growth.
Orban Skewers Hungary Central Bank on EU's Fastest Inflation
The standoff among the country's economic leadership is “negative” for the exchange rate and “the forint is likely to drift weaker in the near-term,” Tatha Ghose, a strategist at Commerzbank, wrote in a note.
Asian markets were also hit after property developer China Evergrande Group said a unit missed a yuan bond payment, adding to concerns whether President Xi Jinping's administration can end the housing crisis.
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