LONDON, Sept 26 — Emerging market currencies hit a more than two-year low today, as the US dollar strengthened on its rising safe-haven appeal, while stocks started the week in red on jitters about a global economic slowdown.

MSCI’s index of EM stocks declined 1.4 per cent, while the index for EM currencies fell 0.6 per cent. Both indexes were headed for their lowest levels since mid 2020.

UK’s sterling crashed to a record low on mounting concerns that the new government’s economic plan will stretch Britain’s finances to the limit, boosting the safe-haven dollar to 114.58 for the first time since May 2002, before easing to 113.22 against a basket of major peers.

“The dollar is on the run and that is always a challenging thing for the EM space,” said Jakob Christensen, head of global macro research at Danske Bank.

“UK’s fiscal plans shook markets as this may be replicated in other countries leading to worse fiscal situations and more aggressive central bank hikes in major economies which have indirect implications for emerging markets.”

China’s onshore yuan touched a 28-month trough, even as the country’s central bank announced fresh steps to slow the pace of the currency’s recent depreciation.

India’s rupee, too, hit record lows against the dollar. Traders told Reuters that the Reserve Bank of India likely sold dollars to contain the currency’s decline, which has been touching fresh lows for the last three consecutive sessions.

South Africa’s rand weakened 1 per cent as a firmer greenback, weakness in gold prices and aggressive stance on interest rates by major central banks weighed on sentiment.

The Turkish lira was also down 0.2 per cent.

The Russian rouble pulled back from a more than two-month high against the dollar in the previous session, as voting continued in referendums that could see four Ukrainian regions annexed by Russia.

“The geopolitical risk around Russia is weighing on neighbouring countries like Poland and Hungary,” Christensen said.

Central and Eastern European currencies were mixed against the euro.

Czech crown was flat after data showed consumer confidence touched almost two-decades low in September, as high inflation and surging energy costs bite.

The Hungarian forint slipped 0.2 per cent against the euro ahead of its rate decision on Tuesday where it is expected to deliver another 100 basis point hike. — Reuters