The dollar hit
multi-year highs against the euro and yen and emerging markets were
under mounting pressure on Tuesday, as the prospect of the first rise in
U.S. interest rates in almost a decade stoked global volatility.
The skittish mood spread from
Asia into Europe where stocks <0#.INDEXE> fell a second day
despite the European Central Bank's new bond buying campaign continuing
to push down the euro and the bloc's already record-low borrowing costs.
Driving up the dollar was speculation that the Federal Reserve will start lifting interest rates from mid-year after another stellar set jobs data on Friday and a subsequent chorus of hawkish Fed policymaker comments.
The euro's rapid melt lower was compounded by worries about Greece as euro zone finance ministers prepared to meet in Brussels, a day after the head of the group, Jeroen Dijsselbloem, had urged Athens to "stop wasting time" and start reforms.
Selling in the euro had gathered pace again in Europe as a break below a major layer of chart support at $1.0762 to $1.0735 left bears eyeing $1.07 the figure and some mulling parity. Britain's pound was also piling on the pressure. It topped 1.40 euros for the first time since late 2007.
The dollar had broken higher on the yen in Asia to reach 122.02, territory not visited since July 2007.
"It is all about the Fed now," said Aurelija Augulyte senior FX strategist at Nordea in Helsinki.
"The ECB (bond buying) bias has now been fully digested, but what the market is now trying to do is price in earlier Fed rate hikes."
The prospect of rising U.S. yields threatened to draw funds away from emerging markets, causing strains from Brazil to Turkey. The Brazilian real led the rout, having fallen for the sixth straight session.
The pressure then spread through Asia and Africa with the South Korean won hitting its lowest since late August 2013, the Singapore dollar since 2010 and South Africa's rand in 13 years.
Eastern Europe was also heavily in the red. Selling accelerated for Poland's zloty, the Czech crown, Romania's leu and Hungary's forint while MSCI's main emerging market stock index .MSCIEF fell for its eighth day running.
"At times like these it is really the currency moves, nobody really cares about the carry anymore," said Jeffries emerging markets strategist Richard Segal.
Driving up the dollar was speculation that the Federal Reserve will start lifting interest rates from mid-year after another stellar set jobs data on Friday and a subsequent chorus of hawkish Fed policymaker comments.
The euro's rapid melt lower was compounded by worries about Greece as euro zone finance ministers prepared to meet in Brussels, a day after the head of the group, Jeroen Dijsselbloem, had urged Athens to "stop wasting time" and start reforms.
Selling in the euro had gathered pace again in Europe as a break below a major layer of chart support at $1.0762 to $1.0735 left bears eyeing $1.07 the figure and some mulling parity. Britain's pound was also piling on the pressure. It topped 1.40 euros for the first time since late 2007.
The dollar had broken higher on the yen in Asia to reach 122.02, territory not visited since July 2007.
"It is all about the Fed now," said Aurelija Augulyte senior FX strategist at Nordea in Helsinki.
"The ECB (bond buying) bias has now been fully digested, but what the market is now trying to do is price in earlier Fed rate hikes."
The prospect of rising U.S. yields threatened to draw funds away from emerging markets, causing strains from Brazil to Turkey. The Brazilian real led the rout, having fallen for the sixth straight session.
The pressure then spread through Asia and Africa with the South Korean won hitting its lowest since late August 2013, the Singapore dollar since 2010 and South Africa's rand in 13 years.
Eastern Europe was also heavily in the red. Selling accelerated for Poland's zloty, the Czech crown, Romania's leu and Hungary's forint while MSCI's main emerging market stock index .MSCIEF fell for its eighth day running.
"At times like these it is really the currency moves, nobody really cares about the carry anymore," said Jeffries emerging markets strategist Richard Segal.
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