Stocks slide after big Fed hike, currencies struggle to keep gains
By Shreyashi Sanyal
June 16 (Reuters) - Most emerging market stocks fell on Thursday, with Asian equities leading the declines after the U.S. Federal Reserve delivered a steep interest rate hike, while currencies in the developing world struggled to retain gains against a firm dollar.
The MSCI's index for EM equities .MSCIEF fell more than 1%, now headed for its worst week since March as an early relief rally set off by the Fed proved to be short-lived.
Markets were initially relieved by the U.S. central bank's move to increase lending rates by 75-basis-points, the largest hike in more than a quarter of a century, to stem a surge in inflation.
"Hopes that the Fed would hike at a less angry pace over the rest of the year was enough for the downtrodden buy-the-dippers to flock back into the market. Markets like their large rate-hikes to be rare and not well done," Jeffrey Halley, senior market analyst at OANDA wrote in a client note.
"But in the EM space, Asian currencies booked only modest gains and as the reality of a widening interest differential and slowing U.S. economy dawns, those gains are being reversed this morning."
China stocks .SSEC .CSI300 shed 0.6% each, while Hong Kong shares .HSI fell 2.5%. The MSCI's index for developing world currencies .MIEM00000CUS edged 0.1% higher.
The Turkish lira TRY= continued its losing streak to the ninth straight session, while Russia's rouble RUBUTSTN=MCX also weakened against the dollar.
Hungary's forint EURHUF= edged higher from record low territory after its central bank unexpectedly raised its one-week deposit rate by 50 bps to 7.25% at a weekly tender, stepping up its policy tightening to curb stubborn and rising inflation that is now running in double-digits.
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Reporting by Shreyashi Sanyal in Bengaluru; Editing by Shailesh Kuber
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