JOHANNESBURG/BENGALURU/BUENOS AIRES : Emerging market currencies will struggle to make modest gains next year as the U.S. Federal Reserve turns more hawkish, squeezing interest rate differentials, amid likely unimpressive growth from world No. 2 economy China, a Reuters poll found.
The new Omicron coronavirus variant is also likely to weigh on emerging market sentiment as further studies are conducted on whether it can evade vaccine protection and how severe the symptoms are. U.S. central bankers will discuss in December whether to end their bond purchases a few months earlier than had been anticipated, Federal Reserve Chair Jerome Powell said on Tuesday, leading to a sharp move higher in shorter-dated Treasury yields.
The Chinese yuan, tightly managed by Chinese authorities, was predicted to lose 1.5per cent against the greenback over the coming year after gaining 2.5per cent so far this year as the economy is widely expected to grow at a much weaker pace next year, compared to 2021.