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Emerging-market currencies are tumbling as the twin threats of rising US interest rates and a global recession send traders scurrying to the safety of the dollar.

The MSCI Emerging Markets Currency Index dropped for a second day, extending this year’s slide to 4,4 percent, heading for the steepest annual drop since 2015.

The Philippine peso led declines in Asian trade, sliding to the lowest level in 17 years, while the South Korean won tumbled to the weakest since 2009.

The Russian ruble sank more than 6 percent in European trade.

The losses in Asia followed those in other EM regions Tuesday — when a surge in the greenback saw the Colombian peso slump as much as 2 percent to a record.

“Emerging markets will suffer in the current environment of either higher developed-market rates or weaker global growth,” Win Thin, global head of currency strategy at Brown Brothers Harriman & Co. in New York, wrote in a research note.

“No matter how things turn out, it’s bad for EM.”

All of the 23 major emerging-market currencies tracked by Bloomberg have weakened over the past month as the Federal Reserve has raised its benchmark rate by a combined 125 basis points at its latest two meetings.

Chair Jerome Powell has said the central bank may hike by either 50 basis points or 75 basis points at its July gathering.

Heightened uncertainty

Asian currencies remain vulnerable even if regional central banks were to step up the pace of tightening, unless they are willing to contemplate positive real interest rates, Wee Khoon Chong, senior market strategist at Bank of New York Mellon in Hong Kong, wrote in a research note Wednesday. 

Deteriorating consumer sentiment and rising interest rates have increased the odds of a US recession in the next year to 38 percent. – Bloomberg