An MSCI Inc. gauge for developing-nation currencies rose as much as 0.1%, with the Mexican peso, Brazilian real and South African rand leading gains. Currencies reversed earlier losses.
“We are waking up to a renewed sense of risk-appetite despite last week’s dollar jump based on a Fed that could afford to withhold interest rate cuts,” said Juan Perez, director of trading at Monex USA. “There is potential for global growth.”
Emerging stocks also gained, extending their advance to over 0.3%, mainly powered by Taiwan Semiconductor Manufacturing Co Ltd and Reliance Industries Ltd.
Even though Friday’s US jobs data reduced the likelihood of three quarter-point interest-rate cuts from the Fed this year, emerging markets can afford the central bank policy divergence as long as the next cycle of monetary policy lifts growth everywhere, according to Perez. A potential global soft-landing would benefit developing economies, he said.
Investors will now look to Wednesday’s US inflation print for more clues on the Fed’s monetary easing policy.
Meanwhile, the shekel rallied, strengthening 2.4% to 3.6735 per dollar after Bank of Israel held its interest rate at 4.5% for the second consecutive meeting. Elsewhere, the rand is headed for its strongest since mid-March amid a rally in precious metals, of which South Africa is a major exporter.
In the bond market, Ecuador’s dollar bonds slumped after Ecuadorian police special forces stormed the Mexican embassy to arrest a former vice president, prompting Mexico to cut ties with the South American nation amid widespread condemnation across Latin America.
