London - World shares hovered near six-week lows on Wednesday and vulnerable emerging market currencies extended losses as investors looked to a U.S. Federal Reserve report expected to signal a cutback in its stimulus policy.
Fed chairman Ben Bernanke said in June the central bank expected to taper its monthly $85 billion bond buying program this year, triggering a global selloff that weighed heavily on emerging markets, which benefit most from the extra liquidity.
The widely-held conviction that the minutes of the Fed's July meeting, due at 1800 GMT, will hint at that policy shift next month hit the Indian rupee, Indonesian rupiah and Turkish lira - despite supportive words and actions from the countries' central banks.
“I don't think we're going to get that clear signal as to whether September is when they pull the trigger on tapering, but that is what the markets are hoping for,” said Daragh Maher, FX strategist at HSBC.
The rupee fell to a record low of 64.52 per dollar, the rupiah looked set to break the key 11,000 per dollar level and the lira plumbed an all-time low, drawing no support from a rate hike.
Large current account deficits make all three countries particularly vulnerable to capital outflows at times of monetary tightening.
Emerging stock markets have shared in the selloff, victims of a growing conviction among investors that an end to Fed bond buying due to the stronger U.S. economic outlook makes developed debt and equity markets a sounder bet.
MSCI's emerging equity index fell 0.6 percent to a six-week low on its fifth straight day of losses, though it remains above the June lows set when the Fed first announced the likelihood of a policy shift.
The MSCI world equity index, which tracks developed and emerging markets, was down around 0.25 percent to levels last seen in early July.
Europe's broad FTSE Eurofirst 300 index and Britain's benchmark equity index tracked the falls in global equity market while U.S. index futures pointed to further weakness when Wall Street opens.
In Japan the Nikkei ended 0.2 percent higher as investors drew support from a declaration by Bank of Japan Governor Haruhiko Kuroda that he would not hesitate to expand the bank's massive asset buying campaign if the economic outlook darkened.
The gain came despite plans by Japan's government to raise the severity of the latest leak at Fukushima to a level 3 event, or a serious radiation incident, that sent shivers through Asian markets and drew a shocked reaction from China.
Among the major currencies - where safe-haven flows ahead of the Fed minutes have favoured the yen and Swiss franc - the dollar had recovered some lost ground, gaining 0.2 percent against a basket of currencies to be off a two-month low.
The euro eased 0.2 percent against the dollar to $1.3390 , having touched a six-month high of $1.3452 on Tuesday, and sterling hit a two-month high of $1.5697 against the dollar when a business survey showed an improvement in UK factory orders.
In the fixed income markets, benchmark 10-year Treasury yields edged back to 2.82 percent though rates remain close to 2013 highs as many investor have already positioned for the potential Fed tapering.
German bond yields were also little changed, having hit their highest since March 2012 on Monday.
“We do not expect much new guidance from the minutes so the risk is that we see a bit lower yields in U.S. Treasuries and Bunds,” said DZ Bank strategist Christian Lenk.
Commodity markets were generally softer. Copper futures dipped 0.2 percent to $7,304 a tonne, while spot gold was steady at around $1,372 an ounce not far from a two-month high set on Monday.
Brent crude prices eased 80 cents to $109.35 a barrel, while U.S. oil for October delivery lost 60 cents to $104.51. -Reuters