NEW YORK, July 11 — A gauge of emerging market currencies declined today as the dollar surged to a 24-year-high on fears of a global recession, while Sri Lankan bonds dropped to record lows after the country's president and prime minister offered to resign following violent protests.

Prolonged instability in the island country may delay progress on negotiations with the International Monetary Fund for a bailout package, Sri Lanka's central bank governor told Reuters.

Sovereign dollar bonds issued by Sri Lanka slipped between 1.5 cents and 2.3 cents to hit record lows today.

MSCI's index of emerging market (EM) currencies slipped 0.2 per cent as the greenback surged to its strongest levels since late 1998.

"The environment will remain challenging for EMs - selling pressure on currencies will not ease, and you are likely to see more warning signals that economies are heading for a recession or stagflation," said Piotr Matys, senior FX analyst at In Touch Capital Markets in London.

Stronger-than-expected US labour market data last week bolstered expectations the Federal Reserve will deliver another 75-basis-point rate hike later this month, a move that could worsen the outlook for battered EM assets.

Turkey's lira slipped 0.4 per cent after ratings agency Fitch downgraded the country's debt rating to "B" from "B+" on Friday, citing rising inflation and economic concerns.

Mexico's peso also suffered, skidding 0.4%, after Moody's on Friday cut the Latin American country's credit rating by one notch on weak investment prospects.

Elsewhere, weakness in shares of China's tech giants and a resurgence in domestic Covid-19 cases pressured regional stocks, with the CSI300 index and Hang Seng index losing between 1.7 per cent and 2.7 per cent. EM stocks were down 1.4 per cent.

Eastern and Central European currencies (CEE) also extended declines, with the Hungarian forint weakening to 408.31 per euro despite recent interest rate hikes. Worries about an energy supply crunch heightened as Nord Stream I, the biggest single pipeline carrying Russian gas to Germany, starts annual maintenance today.

"Even though central banks in Central and Eastern Europe are raising interest rates, the rate hikes are not providing CEE currencies with sufficient support because of major concerns about inflation and a recession," Matys added.

Amid the risk-off, South Africa's rand resumed its own downward trend from last week, falling 0.6 per cent. — Reuters