(Bloomberg) -- Emerging-market currencies were broadly lower Wednesday as the continued escalation in the Kremlin’s war against Ukraine pushed investors toward havens.
Central and Eastern European currencies bore the brunt of the sell-off with MSCI’s gauge of developing-nation currencies down 0.2%, led lower by the Czech koruna, Poland’s zloty and Hungary’s forint. Mexico’s peso also paced losses, retreating 1% against the dollar.
Ukrainian armed forces fired British cruise missiles at military targets inside Russia for the first time, stoking tensions in a conflict that’s dragged on now for 1,000 days and has investors positioning to avoid more losses. “The focus on the escalation between Russia and Ukraine is adding to the buck as a safe haven, particularly against EMEA and those on the periphery of the warfare,” said Juan G Perez, an currency strategist at Monex USA. “There is tremendous concern that as they strike each other this will bode poorly for the region’s assets, especially currencies like HUF, BGN AND PLN.”
Earlier, Russia said it’s prepared to discuss a potential cease-fire in Ukraine with President-elect Donald Trump. In credit markets, Ukraine’s hard-currency bonds rebounded from
their slump on Tuesday, leading gains among their emerging peers.
Meanwhile, the Bloomberg Dollar Spot Index rose some 0.5%, recovering from a three-day drop. Traders also kept an eye on the Federal Reserve’s rate-cut path, which remains uncertain, balanced by speculation over who Trump will tap as Treasury secretary. In equity markets, the index for emerging-market stocks fell 0.2% for the first session in four, with Taiwan Semiconductor Manufacturing Ltd. and Samsung Electronics Co Ltd. leading losses.
Also in focus for EM investors are a spate of interest-rate decisions from some of the biggest economies in the developing world.
The Indonesian rupiah weakened further toward a key support level after the central bank kept its benchmark rate unchanged at 6% due to external jitters, including Trump’s plans for higher tariffs and spending.
Traders raised bets that South Africa’s central bank will deepen its interest-rate cutting cycle after inflation slowed more than expected in October. All 20 economists polled in a
Bloomberg survey expect the MPC to cut the benchmark rate by a quarter-point to 7.75% on Thursday.
Ahead of a meeting of Turkey’s central bankers on the same day, Bank of America economists including Zumrut Imamoglu said there is room for the country to reduce borrowing costs in December but there’s “no urgency” given low levels of unemployment and upside surprises in inflation.
