Emerging Currencies Rise, Stocks Trim Losses Amid Risk-On Mood
The iShares MSCI India ETF slipped as much as 1% as Trump signed an executive order imposing an additional 25% tariff on India over its purchase of Russian energy.
Emerging-market currencies extended their earlier gains, while stocks trimmed losses as the latest remarks by Federal Reserve official Neel Kashkari weighed on the dollar and boosted risk appetite.
The MSCI index for developing currencies gained as much as 0.2%, led by the Colombian peso and South African rand, while a similar gauge for equities edged lower. Kashkari said the US economy is slowing, making an interest-rate cut in the near term appropriate. He sees two cuts by the end of the year.
“Expectations of looser Fed policy and resilient global economic activity continue to fuel the rally in risk assets,” said Elias Haddad, a strategist at Brown Brothers Harriman.
Most currencies in the developing world climbed as traders continue to price in US rate cuts, with names in Latin America and Eastern Europe leading the advance.
The Chilean peso, however, was the worst-performing currency among peers, tumbling as much as 1.4% against the dollar. The move came after the central bank announced plans to build up its international reserves, surprising investors after it had repeatedly said it was comfortable with the level of currency holdings.
A fresh batch of earnings reports in US hours also boosted sentiment for global equities, lifting those in developing nations along the way. Still, the MSCI Emerging Markets Index of stocks was weighed down by a drop in Taiwan Semiconductor Manufacturing and Samsung Electronics, as US President Donald Trump’s threat to raise tariffs on the sector and an investigation into a theft of trade secrets at TSMC spooked investors.
Investors are reassessing the outlook for EM equities after a seven-month rally, the longest winning streak since 2017. Trump’s tariff measures undermine economic growth in the developing world, with a vast number of countries left without a deal and some like India threatened with punitive levels of duties.
The iShares MSCI India ETF slipped as much as 1% as Trump signed an executive order imposing an additional 25% tariff on India over its purchase of Russian energy. The rupee had stopped trading by the time the announcement was made.
Oversold Territory
Ukraine sovereign dollar bonds posted the biggest gains among peers on the Bloomberg EM Sovereign Total Return Index. Investors are watching for Russia’s next steps in its war against the country as Moscow considers concessions including a pause in air strikes. Meanwhile, the nation appointed a chief of the Economic Security Bureau of Ukraine, fulfilling a step required by the International Monetary Fund.
Sovereign notes in Zambia slumped, underperforming most peers after the IMF warned that the country’s capacity to service its debt remains weak, dampening bondholders’ hopes for improved terms.
