Emerging market assets declined sharply on the announcement that the US Federal Reserve would introduce an interest rate increase, coupled with a more hawkish position than expected for the coming year.
“This is a Fed that could be tighter than we thought. That’s what really moved the market," said Mohamed El-Erian, the chief economic adviser at Allianz SE.
The Federal Reserve increased borrowing costs by 25 basis points and laid out a steeper forecast for 2017, worrying investors.
Emerging markets could be negatively impacted by this as higher dollar rates reduce proclivity for risker assets.
The Kingdom of Saudi Arabia, Qatar, Kuwait, the United Arab Emirates, and Bahrain raised interest rates following the Federal Reserve's announcement.
The MSCI Emerging Market Index declined 1.6 per cent, while the MSCI Emerging Markets Currency Index declined 0.9 per cent.
Read more at Bloomberg.