Pressure is most intense on countries with managed exchange rates, which are finding it increasingly difficult to stop their currencies from weakening, particularly after China devalued the yuan last week. Ukraine is under pressure to remove capital controls on the hryvnia, while Nigeria is losing the battle to prevent the naira from going the way of other oil-dependent currencies.
Whether the Federal Reserve raises interest rates in September or December is turning out to be almost irrelevant for emerging-market currencies and those from nations that export minerals to China.
Rather than being dominated by prospects for U.S. policy, they’re falling as commodity values collapse. South Africa’s rand dropped to a 13 1/2-year low against the dollar, even after minutes of the Fed’s July meeting prompted traders to pare bets on a rate increase next month. Kazakhstan’s tenge plunged a record 23 percent after the country relinquished control of its exchange rate.
“The moves in EM are getting pretty wild,” said Peter Rosenstreich, chief market strategist at Swissquote Bank SA in Gland, Switzerland. “There’s probably not a big difference between September and December — it would psychologically change the game if they pushed it out to 2016.”
The rand slipped 0.6 percent to 12.9708 per dollar as of 10:54 a.m. London time, after weakening through 13 for the first time since 2001. The Aussie dropped 0.6 percent, the most in more than a week, to 73.01 U.S. cents.
The euro climbed 0.3 percent to $1.1157, adding to Wednesday’s 0.9 percent gain, while the yen was little changed at 123.83 to the dollar, compared with a 13-year low of 125.86 reached June 5.
Traders reduced odds on a September rate increase by the Fed to less than 40 percent. Futures show a 66 percent chance the U.S. central bank will act in December.
Minutes of its last policy meeting published Wednesday showed most officials didn’t consider that the conditions for the first rate increase in nine years had been reached. Still, participants said conditions “were approaching that point” where the world’s largest economy could sustain a slight increase in borrowing costs.
Emerging-market currencies around the world are meanwhile plunging in line with commodities. Kazakhstan, central Asia’s biggest crude exporter, moved to a free float on Thursday, a day after Vietnam marked down the dong for the third time this year.