Emerging market stocks and currencies rally on doubts of a US rate rise

 
Sarah Spickernell
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Emerging markets have been in decline since last month (Source: Getty)
Emerging markets made major gains today after doubts were cast over a US interest rate rise next month.
The MSCI emerging markets index is currently 3.3 per cent higher, having climbed steadily since the start of trading.
The rouble has also risen 3.79 per cent against the US dollar, while the Malaysian ringgit and Indonesian rupiah have risen 0.85 per cent and 0.4 per cent respectively against the currency.
Yesterday, senior Fed policymaker Bill Dudley said a US interest rate hike next month had been become “less compelling” because of the China market panic.
The Shanghai Composite Index plunged 8.5 per cent at the start of the week, causing a sell-off across markets globally as investors feared the economic slowdown could spill over into other countries.
At this moment, the decision to begin the normalization process at the September FOMC meeting seems less compelling to me than it was a few weeks ago.
Emerging markets have been in decline since last month, when an imminent interest rise became a real possibility. In its minutes from the July meeting, the Fed said the appropriate climate was “approaching” due to improved economic conditions.
The reduced possibility of a September hike has lessened their concerns, however. It also benefited US markets, with the Dow Jones and S&P 500 both trading around two per cent higher.

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