Turkish lira, South Africa, and Indonesian rupiah hits more than 20-year low

A strong dollar and a surge in global oil prices above $85 a barrel sent emerging market currencies broadly lower on Tuesday, while Hong Kong led a fall in stocks over worries about a slowdown in Chinese manufacturing.

Currencies of net oil importers including the Turkish lira, and South Africa's rand lost ground and the Indonesian rupiah hit a more than 20-year low, topping 15,000 to the dollar for the first time since the Asian crisis in 1998.

Oil prices rose almost 3 per cent on Monday to hit a four-year high, raising the prospect of higher inflation and more pressure on growth in countries which have to buy in their fuel supplies.

Manufacturing activity in countries from China to Russia this week has also turned investors' minds back to the issues of growth and capital outflows that drove a sell-off in several major emerging markets earlier this year.

MSCI's emerging currency index as a whole gained in September and the lira surged on Monday, but markets remain nervous about the impact of rising U.S. interest rates.

"The PMI yesterday suggested we are going for slower growth," said Jakob Christensen, head of EM research at Danske Bank in Denmark.

"But we have to bear in mind that it comes from a higher level and so there is still some room before we reach, in some countries at least, contractionary levels."

Resuming trading after Monday's holiday, Hong Kong's main Hang Seng stock index fell more than 2 per cent on worries about a slowdown in growth in Chinese factories.

The broader MSCI index of EM equities fell 1.38 per cent, its biggest percentage decline in nearly a month.

While financial markets in India and China were closed, South Korea's main Kospi index slumped 1.25 per cent as chip stocks including Samsung Electronics and SK Hynix weakened ahead of their financial results, expected to mark a peak in earnings.

Adding to a broadly glum tone were comments by a senior official of Italy's ruling League party, who said most of the country's problems would be solved if it returned to its own currency.

The comments pushed the yield on Italy's 10-year bonds to its highest level since March 2014 and weakened the euro by a third of a per cent against the dollar.

The gloom spread to European peers with Hungary's forint, the Polish zloty and the Czech crown slipping against the euro.

For GRAPHIC on emerging market FX performance 2018, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance 2018, see https://tmsnrt.rs/2OusNdX

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(With inputs from agencies.)