Asian currencies were leading losses in emerging markets, dragging the MSCI currency gauge lower. In Latin America, the Mexican peso led its peers higher, gaining for the first time in three sessions, while the Chilean and Colombian pesos strengthened on the back of higher copper and oil prices. “Investors will continue to navigate the bumpy road toward the US election with a USD bias,” said Alejandro Cuadrado, head of global FX and Latin America strategy at BBVA in New York. Traders are dialing back bets on aggressive rate cuts given the US economy remains robust and Fed officials this week sounded a cautious tone over the path of easing. Rising oil prices and the prospect of bigger fiscal deficits after the US presidential election are also adding to concerns.
“Developments in US politics remain a major source of concerns for emerging markets, especially those economies that mainly rely on global trade, which could be significantly impacted if former President Donald Trump returns to the White House,” said Piotr Matys of InTouch Capital Markets. Meanwhile, the International Monetary Fund lowered its global growth forecast for next year. Global output will expand 3.2%, 0.1 percentage point less than a July estimate, the IMF said in an update of its World Economic Outlook released on Tuesday.
“Emerging markets are more negatively affected in this moment because the IMF lowered it’s growth forecast for 2025,” which could indicate a need for more monetary stimulus, said Juan Perez, director of trading at Monex USA.
Elsewhere, Hungary’s central bank kept its key interest rate unchanged after the forint’s recent drop eliminated the room for continued monetary easing. Zambia is considering a debt-for-nature swap to keep reducing its overseas obligations, according to Finance Minister Situmbeko Musokotwane.
The rand touched its strongest levels in two weeks ahead of South Africa’s inflation data, which is expected to show annual inflation eased by 0.4%, strengthening the case for another rate cut at the central bank’s November meeting.
Sri Lankan authorities attending the IMF meetings in Washington this week are discussing the nation’s debt restructuring with international bondholders, according to a cabinet spokesperson.
