EMERGING MARKETS-Strong dollar weighs on emerging FX at year-end; South Korea in focus

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South Korean parliament votes to impeach acting president

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Rouble slumps after central bank says will withdraw support

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EM stocks, FX indexes both down 0.3%

By Lisa Pauline Mattackal

Dec 27 (Reuters) – Emerging market currencies fell against a firmer dollar on Friday as investor focus turned to the outlook for 2025 while South Korean markets tumbled after the country’s parliament voted to impeach acting president Han Duck-soo.

Korea’s won slumped more than 1% to its lowest since March 2009, while stocks also closed more than 1% lower.

MSCI’s index tracking EM currencies was down 0.3% at 0915 GMT, trading at its lowest since early August as the U.S. dollar hovered at two-year highs.

The Russian rouble fell 1% against the dollar after the country’s central bank announced it will withdraw some support for the currency in the first working week of 2025.

Gains in the dollar and rising U.S. Treasury yields are set to cement a turbulent year for emerging market assets after the U.S. Federal Reserve signalled a slowing pace of interest rate cuts next year and with markets continuing to gauge the possible impact of threatened tariffs from Donald Trump’s incoming administration.

Several EM central banks, including in India and Brazil, have intervened in their currency markets to stem declines since the Fed’s policy meeting earlier this month.

“U.S. dollar movement will likely continue to the bullish side, as the Fed’s hawkish cut and strong U.S. economic growth in comparison to other economies is still being priced into the market,” said Ahmed Azzam, regional financial market analyst at Equiti Group.

“For emerging market currencies, given the uncertainty around whether they will follow the Fed’s moves or not, the negative impact may stay until the end of the first quarter of 2025.”

Turkey’s main share index gained 0.4% while the lira weakened 0.3% against the dollar. The country’s central bank cut its key interest rate by 250 basis points to 47.5% on Thursday, more than expected.

The Indian rupee pulled back slightly from an all-time low of 85.320, with traders saying the central bank was likely selling dollars to support the currency, though it remained on track for its worst single-day fall since February 2023.

MSCI’s index of EM stocks was down 0.3%.

Emerging European stock markets were mixed as most reopened after the Christmas holidays. Poland’s main index fell 0.4% and Greek stocks were up 0.3%.

Markets in Hungary were closed for a public holiday.

HIGHLIGHTS:

** Indonesia cenbank, fin ministry agree debt switch for COVID bonds

** Central bank says Thai economy slows in November

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(Reporting by Lisa Pauline Mattackal; Editing by Kirsten Donovan)

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