London: Trade tensions and a stronger dollar sent jitters through emerging markets on Thursday with currencies plumbing multi-month lows and stocks resuming their recent falls.

China’s commerce ministry accused the United States of being “capricious” over bilateral trade issues, and warned that the interests of US workers and farmers ultimately will be hurt by Washington’s penchant for brandishing “big sticks”.

On Monday, President Donald Trump threatened to hit $200 billion (Dh734 billion) of Chinese imports with 10 per cent tariffs if Beijing retaliates against a previous announcement to target $50 billion in imports.

MSCI’s emerging equity benchmark index weakened 0.8 per cent, having now chalked up losses for six of the past seven sessions. Both China onshore and offshore indexes suffered losses of more than 1 per cent, with Hong Kong closing at its lowest in six month.

“It’s of course the trade concerns here, we are looking for more escalations on trade dispute,” said Jakob Christensen, head of EM research at Danske Bank, adding markets were closely watching countries like India and Russia planning counter measures against Washington’s trade actions.

“Underlying [is] a negative mood, the rising US rates, US liquidity, the stronger dollar — all of which is weighing on emerging markets as well.” Political tensions and pressure from the US dollar scaling to its highest in 11 months pushed emerging market currencies into another sell-off.

Fixing rate

China’s onshore yuan weakened against the dollar and broke through the 6.5 to the dollar level, erasing all the gains it had made this year. The central bank set its fixing rate to the weakest in more than five months.

Indonesia’s rupiah dropped 1.2 per cent — its steepest daily fall in more than two years — after the country’s currency markets opened for the first time since June 8 and despite the central bank saying it was ready to act.

South Africa’s rand fell 0.8 per cent, extending early losses after data showed the current account deficit widened more than expected in the first quarter to register its largest shortfall in two years.

Mexico’s peso, a weather vane for trade sentiment across emerging markets, weakened 0.8 per cent. Markets are expecting the country’s central bank to raise its benchmark interest rate later in the day to the highest in more than nine years to counter a slump in the peso and match a US Federal Reserve hike.