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Bloomberg
A rally in emerging-market assets ran out of steam after a Federal Reserve official said markets are underestimating the likelihood of a U.S. rate increase this year.
The MSCI Emerging Markets Index surrendered a ninth day of gains after New York Fed President William Dudley said borrowing costs could go up as soon as next month. The currency gauge pared its advance as futures traders boosted bets for higher U.S. rates. Brazilian and Turkish stock benchmarks fell at least 0.8 percent. The South African rand slid, erasing earlier gains.
Investors have poured almost $17 billion in the past 11 weeks into U.S. exchange-traded funds buying stocks and bonds in emerging markets as investors bought riskier assets amid confidence the Fed will delay a rate increase until at least March next year. While traders now see a 51 percent chance of a rate hike by year-end, the odds of that happening next month are only 22 percent, according to fed funds futures. Dudley said such estimates are too low and that “the market is complacent†about the need for hikes.