Shock rate hikes backfire as EM panic gathers pace

A series of shock rate hikes have failed to prevent a fresh sell-off in emerging market currencies, with developed market equities including the FTSE 100 also caught in the storm.

Overnight, Turkey hiked rates by some 4.5% - well ahead of a consensus 2.25% rise - taking their main rate to 12%, in a move that initially appeared to have calmed investors' fears. But with the Turkish lira rebounding against the dollar and equity markets opening higher this morning, a second surprise EM hike appears to have prompted a fresh downwards spiral for emerging economies. South Africa hiked interest rates by 50 basis points to 5.5% this afternoon, despite every economist polled by Bloomberg expecting no change, but the move quickly backfired. The South African rand fell ...