Sell-off in emerging market assets and commodities 'intensifies'

A myriad of currencies experienced a decline on Tuesday (August 18th), due to a sell off among emerging-market assets and commodities worsening. However, the pound bucked the trend, as inflation unexpectedly turned positive for the UK in July.

Meanwhile, oil and copper slipped on the back of speculation that oversupply will continue to be an issue, while fears about China's economy slowing down are still weighing heavily on markets.

Earlier today, it was revealed that shares in Shanghai plummeted to their lowest for three weeks and Thailand’s baht sank to a six-year nadir following yesterday's fatal attack on the country's capital Bangkok, which killed at least 18 people.

Thai stocks sank to their lowest since January 2014, with the benchmark slipping by 2.8 per cent and the baht dropping 0.7 per cent to 35.620 versus the US dollar as concerns about the nation's tourism industry arose from yesterday's blast. 

Hopes that the Federal Reserve is on the verge of raising interest rates in September were somewhat dampened on Tuesday, leading to demand for riskier assets drying up. Turkey's central bank decided to keep interest rates as they currently are, which saw the lira slip to a record low.

Martial Godet, the head of emerging-market equities and derivatives strategy at BNP Paribas SA in Paris, told Bloomberg that there is a dearth of "positive catalysts for emerging markets", while dovish comments from the Fed and a postponed interest rate hike "could help stabilise the situation, especially on the currency side".

Russia's ruble deteriorated for the fourth day, hitting carmakers in the country hard, as the cost of the foreign part these firms rely on have been driven sky high. This has forced their hand, as they have had to raise prices at home, making their goods less competitive overseas.  

The industry has enjoyed annual growth of ten per cent for the last decade, but it has now become a casualty of an economic crisis exacerbated by plummeting oil prices and sanctions laid down by Western governments for Russia's role in the Ukraine disaster. 

While the ruble continued to sink, the pound climbed 0.7 per cent on the back of an unexpected rise in inflation for July, helping it climb to $1.5701. Futures indicate that US stocks are set to fall, which would mark their first drop in three days. 

The Shanghai Composite Index shed 6.2 per cent, as investors reduced bets on additional stimulus being rolled out and conjectured that the government will taper efforts to support equities, after new data revealed house prices increased. The Hang Seng China Enterprises Index erased a gain of 1.3 per cent, by losing 1.5 per cent. 

Investors have become more worried about the growth outlook for emerging markets, with concerns peaking when China decided to devalue to the yuan, as this suggested the country is struggling to combat a slowdown in its economy. 

The Tadawul All Share Index in Saudi Arabia decreased by 2.4 per cent, marking its sixth consecutive day of losses and its lowest level since January 2014 - impacted by comments from the International Monetary Fund which suggested falling oil prices will lead to spending cuts and a cap on economic growth. 

In currencies, the Turkish lira shed 0.5 per cent to 2.8826 versus the dollar, falling to an all-time low due to talks between political parties about a possible coalition government collapsed. The ruble tumbled by 0.4 per cent, pushing it down to 65.7970 per dollar and Malaysia's ringgit shaved 0.4 per cent.

The Australian dollar put on a similar performance, falling to 73.42 cents, while the Norwegian krone weakened by 0.3 per cent to 8.2376 per US dollar. The Canadian dollar slipped by 0.3 per cent against its American counterpart to $1.3112 per US dollar.