EMERGING MARKETS-Mexico peso dips on Fed minutes, Ukraine bonds dive
By Michael O'Boyle and Christine Murray
MEXICO CITY Feb 19 (Reuters) - Emerging market currencies weakened on Wednesday after minutes from the last U.S. Federal Reserve meeting suggested policymakers would keep up the pace of a withdrawal of monetary stimulus.
Meanwhile, Ukraine's bond prices fell as more violence hit Kiev, while mounting unrest in Venezuela drove the price of its credit default swaps to near five-year highs.
Emerging market assets have slumped since last May on expectations that less monetary stimulus will drive up U.S. yields and pull back a tide of investment that had flooded into emerging markets in recent years.
Minutes of the Fed's Jan. 28-29 policy meeting, released on Wednesday, showed several officials wanted to drive home the idea that their asset-purchase program would be trimmed in predictable, $10-billion steps unless there is a big economic surprise this year.
Mexico's peso and the South African rand, two of the most liquid emerging market assets, slipped to their weakest levels in nearly one week after the Fed minutes.
Many emerging market currencies had steadied in February after sharp drops in January, but views on the Fed could drive more selling, analysts said.
"I think we are back to selling emerging markets," said Win Thin, an analyst at Brown Brothers Harriman in New York. "The tapering is unfolding and at some point we have to talk about rate hikes. That is the next shoe to drop." Continuación...