EM Assets Slide on Latest Tariff Salvo, Cloudy Fed Rate Cut View
Emerging-market assets dropped as the fresh round of US tariffs including a 100% duty on branded or patented pharmaceuticals hurt sentiment while strong American data clouded the view on Fed rate cuts, helping the dollar hold onto gains.
MSCI’s emerging markets index slumped 1% on Friday, the most since Aug. 20, while a gauge tracking developing-market currency returns traded 0.3% lower. A Bloomberg Asia emerging-market index tracking large and mid cap price returns slid 1%.
Emerging stocks face pressure from broad-based strength in the dollar, with Trump’s latest tariffs further complicating matters for developing nations, especially those with direct exposure to the US, says Shier Lee Lim , lead FX and macro strategist at Convera.
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Better-than-expected US data, including that on goods orders and GDP growth has led to a “repricing of rate cut expectations”, with markets now less optimistic about near-term easing by the Federal Reserve, she says.
A Bloomberg spot dollar is headed for its best week since the beginning of August, while Nomura strategist Naka Matsuzawa writes that forecasts for Fed rate reductions in 2026 have shrunk to 60 basis points.
“A sense that rate cuts are ending tends to emerge when this drops below 50bp,” he wrote.
Stocks of Asian health firms across Australia, South Korea, Japan and India plummeted after the latest tariff salvo.
Across Asia, Singapore stands out as “far more exposed” with 40% of the nation’s exports to the US currently enjoying exemptions in the pharmaceutical sector, writes Michael Wan , senior currency analyst at MUFG Bank.
Among Asian emerging currencies, the Philippine peso extended losses after allegations of corruption in state projects triggered the steepest fall in two months on Thursday. The country will from Friday afternoon, with operations of most government agencies suspended as Severe Tropical Storm Bualoi shut offices.
The Thai baht weakened after a minister said that the currency’s rally against the dollar was detrimental for the nation’s exports.
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