US stance on interest rates put pressure on emerging markets, Forex

Emerging market shares fell on Friday, on track for a third straight week of losses with investor sentiment still subdued after U.S. policymakers signalled future rate hikes. Most developing world currencies remained under pressure as the dollar started to recover from one-month lows.

MSCI's index for emerging market stocks fell marginally as gains in Johannesburg and Hong Kong failed to offset substantial losses by mainland China shares, with the blue-chip index plumbing a 33-month low. A global sell-off ensued on Thursday after the U.S. Federal Reserve stuck to plans to increase interest rates despite risks to growth and as the threat of a U.S. government shutdown loomed.

"Risk sentiment remains fragile amid worries of moderation in global growth, a threat of U.S. government shutdown into holidays and geopolitical risks (U.S. claim of Chinese spying poses risk to U.S.-China trade talks)," said Christopher Wong, Senior FX Strategist at Maybank.

The United States and three allies chastised China for economic espionage on Thursday as U.S. prosecutors indicted two Chinese nationals on charges of stealing confidential data from American government agencies and businesses around the world.

"The start of 2019 is looking like the reverse of 2018, with pessimism growing by the day," said Eric Robertson, Global Head, FXRC Research and Macro Strategy, Standard Chartered Bank in a note. Russia's MOEX index fell 0.7 per cent, on track for the second week of losses as oil prices remained subdued through the week, weighing on energy stocks.

Markets in India fell 1 per cent on global cues while the rupee was on track to post its best week since March 2016 on robust gains from oil's slump through the week. Emerging market currencies remained mixed as the dollar recovered from one-month lows. There were broad gains by the Russian rouble but losses by the trade-exposed Chinese yuan and the South African rand.

The Turkish lira was a shade weaker after data showed a slight fall in consumer confidence in December. In Eastern Europe, the Romanian government could approve tax measures that have knocked down assets in the past 2 days. In particular, Romania's blue-chip index fell to its lowest level in more than six months, wiping out almost all of its 2018 gains.