In the News

Emerging Market Currencies Fall as Traders Await Waller Remarks

(Bloomberg) -- Most emerging market currencies fell Wednesday with money managers rebalancing positions at the end of the first quarter and as traders awaited remarks from Federal Reserve officials.

The MSCI index for developing world currencies fell 0.1%, with South Korea’s won, Indonesia’s rupiah and Thailand’s baht leading losses. The dollar index remained little changed.

The Mexican peso bucked the trend, outperforming developing-nation peers as a mix of high rates, low volatility and ample liquidity pushed the currency to its highest level since 2015. South Africa’s rand also advanced after the country’s central bank kept interest rates at a 15-year high.

Traders are switching focus to comments by Fed Governor Christopher Waller at the economic club of New York after the market close, looking for any clues on the path for US interest rates. Investors are also cautious ahead of a release of economic data — numbers on US growth, jobless claims and personal consumption are among those due Thursday morning — and amid a shorter week in most global markets due to the Easter holiday.

“Fourth-quarter GDP could surprise with an upward revision, thus making it less likely that the Fed intervenes in what seems like a very strong economy that isn’t showing many signs of slowing down,” said Juan Perez, director of trading at Monex USA.

Money managers seeking to navigate the complexities of China’s foreign-exchange management system are finding visibility getting increasingly cloudy. Since last Friday, authorities have flipped flopped with their favorite tool for guiding expectations — the yuan’s daily reference rate, which pins the currency to a level around which it’s allowed to deviate just 2%.

The volatility in the yuan has fed through to currencies in Asia and then to the broader emerging-market world in recent days.

Earlier in the day, Japan’s yen fell to its lowest level in about 34 years versus the dollar, only to reverse losses amid speculation that authorities could intervene to support the currency. But the rebound was modest and faded as the day wore on, leaving the yen to trade around 0.1% stronger versus the greenback in mid-afternoon in New York.

In debt markets, Ghana’s dollar bonds posted the best gains in emerging markets as Finance Minister Mohammed Amin Adam said the government will begin talks with international bondholders to restructure about $13 billion of defaulted debt in the coming week. Sri Lanka’s dollar bonds were also some of the best performers after China said it would “continuously” assist with the South Asian nation’s debt restructuring process.


The gauge for emerging-market stocks slid 0.3% with GDS Holdings Ltd. leading losses as the company, which operates dozens of data centers across China’s largest cities, reported a wider loss per share in the fourth quarter than Wall Street expected.

Still, EM equities remain on track for a second consecutive month of gains on optimism that central banks are likely to cut rates this year.

After the close of trading in the US, FTSE Russell said South Korea will continue to stay on the watch list for inclusion to its global bond index — and India for the emerging- market equivalent — once more delaying the countries’ addition to the key gauges by at least another six months.

On the equities side, FTSE Russell said it will keep Vietnam’s status as a frontier market unchanged. The index provider also refrained from demoting Pakistan or Egypt’s status, keeping both on watch lists for possible reclassification.

Reporting By Kevin Simauchi With assistance from Selcuk Gokoluk.

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