Emerging Markets Struggle Amid Strong Dollar and Treasury Yield Spike

Emerging market currencies faced downward pressure due to a strong U.S. dollar and rising Treasury yields, with Russia's rouble notably gaining. Holiday trading was thin, impacting various assets. Markets in Poland, Czech Republic, and Hungary were shut, while South Africa and Turkey experienced mixed market reactions.

Tuesday's trading saw most emerging market currencies slightly decline, pressured by a robust U.S. dollar and surging Treasury yields. Despite this, Russia's rouble managed to rise for the fourth consecutive session, spurred by upcoming corporate tax payments.

Alor brokerage analysts noted an anticipated increase in demand for foreign currency, potentially straining the rouble further as investors hedge positions ahead of New Year holidays. Although the rouble gained over 6% this month, it is still forecasted to decline by 12% against the dollar this year due to U.S. sanctions and concerns over Ukraine.

Globally, emerging market assets faced challenges from a dollar nearing a two-year high and steady U.S. 10-year Treasury yields. In Europe, quiet trading persisted with Polish, Czech, and Hungarian markets closed for Christmas Eve. Meanwhile, South Africa's rand and Turkey's lira showed slight weakness against the dollar.

(With inputs from agencies.)