LONDON, July 5 (Reuters) - Top emerging market currencies dropped on Wednesday as worries about the South African central bank's cherished independence highlighted nerves about higher global borrowing costs.
A more than 3 percent slump in oil compounded matters, but it was the more than 2 percent slump in South Africa's rand that did the most damage, following reports that the ruling African National Congress had agreed at its party conference that the central bank should be nationalised.
The latest falls saw the currency of Africa's most industrialised nation plumb lows it had last hit in mid-June when a row over the bank's mandate had also rattled markets just as the economy fell back into recession.
Investors' nerves were tested further as Russia's rouble fell 1 percent on its third straight day of losses, Turkey's lira slumped 1.5 percent and Mexico's peso led Latin American currencies lower as it dropped as much as 1.3 percent .
"The emerging markets' fish tend to swim together, and that is what is happening today," said John Hardy, head of FX strategy at Saxo Bank.
Adding to strains were expectations about the minutes of the last U.S. Federal Reserve meeting due for release later in the day.
They will be scrutinised to see how much appetite there is for further rate hikes or for signs of more concern among policymakers about a downturn in U.S. inflation and growth.
A shift towards more hawkish language by several major central banks has dominated the past week and left markets unsure of how much longer emergency stimulus in Europe will continue to support global asset prices.
"It is unusual because we are not seeing a sell-off across G10 markets, bond markets are stable, equity markets are stable," said Guillaume Tresca, senior emerging market strategist at Credit Agricole.
"It is a pure emerging markets sell-off and that is surprising."
In Pakistan, analysts said the country had effectively devalued the currency after the central bank said a sudden 3 percent weakening of the rupee would help the country's external account and shore up economic growth.
Emerging assets elsewhere enjoyed a better session.
MSCI's emerging stock index bounced 0.2 percent after its biggest fall in nearly three weeks.
Bourses in the Gulf also recovered ahead of a meeting of foreign ministers of four Arab states in Egypt to consider further sanctions against Doha over accusations it was aiding terrorism and courting regional rival Iran.
Qatar's stock market index rose 0.4 percent while Kuwait stocks advanced 0.5 percent. However, Riyadh's bourse fell 0.4 percent, extending the previous day's sharp fall.
After the market close, the ministers expressed disappointment with what they called Qatar's "negative" response to their demands, but did not announce new sanctions.
For GRAPHIC on emerging market FX performance 2017, see http://tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2017, see http://tmsnrt.rs/2dZbdP5
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For TURKISH market report, see
For RUSSIAN market report, see)
Equities Latest Net Chg % Chg % Chg
Emrg Mkt Indx 1008.68 +1.96 +0.19 +16.98 Czech Rep 986.78 +5.51 +0.56 +7.07 Poland 2307.49 +13.22 +0.58 +18.46 Hungary 35298.14 +408.58 +1.17 +10.30 Romania 8142.40 +213.73 +2.70 +14.92 Greece 841.34 +15.45 +1.87 +30.72 Russia 1008.37 -9.22 -0.91 -12.49 South Africa 46241.44 +421.56 +0.92 +5.33 Turkey 00744.45 -463.34 -0.46 +28.93 China 3207.08 +24.28 +0.76 +3.33 India 31245.56 +35.77 +0.11 +17.35 Currencies Latest Prev Local Local close currency currency
% change % change
Czech Rep 26.09 26.13 +0.16 +3.52
Poland 4.24 4.24 -0.02 +3.94
Hungary 308.34 307.79 -0.18 +0.16
Romania 4.59 4.58 -0.13 -1.16
Serbia 120.31 120.70 +0.32 +2.53
Russia 60.05 59.41 -1.08 +2.02
Kazakhstan 324.56 322.66 -0.59 +2.80
Ukraine 26.11 26.04 -0.25 +3.43
South Africa 13.39 13.18 -1.57 +2.53
Kenya 103.70 103.70 +0.00 -1.28
Israel 3.51 3.51 +0.09 +9.75
Turkey 3.61 3.56 -1.43 -2.31
China 6.80 6.80 -0.01 +2.11
India 64.80 64.78 -0.03 +4.86
Brazil 3.32 3.31 -0.25 -1.94
Mexico 18.33 18.20 -0.71 +13.01
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 329 5 .19 7 82.40 1
All data taken from Reuters at 15:50 GMT. Currency percent change calculated from the daily U.S. close at 2130 GMT. (Additional reporting by Marc Jones; editing by John Stonestreet)