MSCI’s EM stock gauge has advanced 2.2% this week, reaching its highest level since October amid increased appetite for riskier assets. An index of developing-nation currencies is up 0.3% Thursday as expectations for a more dovish Federal Reserve undermine the dollar.
The greenback also sank following reports US President Donald Trump and Chinese President Xi Jinping spoke Thursday.
“The fact that the labor sector is showing signs of softening in the US is a major factor aiding the deterioration of the dollar across the board,” said Juan Perez, director of trading at Monex USA. News of the call between Washington and Beijing is also aiding commodities, bolstering many developing world currencies, he said.
The Korean won led gains in the MSCI currency index, extending an advance from earlier in the week after a presidential election helped end a political power vacuum. The currency stands out among other outperforming peers in the past month, said Chris Turner, a strategist at ING Bank NV, who highlighted demand for higher yielding currencies in Latin America, South Africa and Czech koruna.
The market is betting Korean officials will be asked to allow the won to strengthen “should market forces dictate such a move,” Turner said in a note. He anticipates the won will extend its gains beyond the 1350 level against the dollar.
The Brazilian real jumped to its highest level since October amid the EM currency rally, and is among the top gainers in the MSCI currency index.
In credit markets, Peru is selling new global bonds denominated in its local currency for the first time in almost a year. At the same time, the South American nation is offering to repurchase notes due in 2026, 2028, 2029 and 2031 for cash, according to a Thursday statement. Some of the old debt will be exchanged for new bonds.
Elsewhere, Kazakhstan held borrowing costs unchanged for a second meeting and cast doubt on a reduction this year. And Poland’s central bank will take future decisions based on incoming data but will act to tame inflation in a sustainable manner, Governor Adam Glapinski said at a news conference.
