(Bloomberg) -- Emerging-market currencies shuffled between gains and losses on Wednesday, as investors turned their focus to the US economy for signals on the direction of monetary policy.
The MSCI gauge for developing-nation currencies was recently little-changed after rising as much as 0.2% earlier in the session, led lower by Turkey’s lira, South Korea’s won and Brazil’s real. A companion index for equities was up 0.714%, buoyed by shares listed in South Korea and Hong Kong. The dollar rose.
“Ultimately, risk-forward markets are ignoring Iran, conflict, tariffs, just grinding on looking for silver linings and reprieves,” said Juan Perez, currency strategist at Monex USA.
Markets are considering the possibility of an earlier-than- expected cut US to interest rates and a third reduction to borrowing costs by the end of the year, with bets of one next month edging higher. Fed Chairman Jerome Powell is speaking for a second day during his testimony before the Senate Banking Committee.
Investors are also monitoring developments around the looming tariff deadline set by US President Donald Trump — which is just two weeks away — along with a fragile ceasefire between Israel and Iran.
Stephen Miran, chair of the Council of Economic Advisers said earlier on Wednesday that he expects there to be “some stubborn holdouts,” referring to the willingness of other countries to engage in trade deals.
Elsewhere in currency markets, Brazil’s real slipped against the greenback. Lawmakers there will vote on a measure that will block a tax hikes on some financial transactions.
South Korea’s won also lagged alongside peers, giving up earlier gains on the back of stocks seeing outflows from foreign funds. Traders also digested a spate of central bank decisions.
The Bank of Thailand and policymakers from the Czech Republic held borrowing costs steady.
In credit markets, sovereign dollar bonds from Ukraine and Nigeria were among the best performers as risk appetite continued to recover.
Meanwhile, borrowers from the developing world continued to tap fixed-income investors. Peru, Uruguay and LATAM Airlines launched plans to sell debt abroad. Ghana is poised to resume domestic bond sales later this year, too, in a sign that the nation is recovering from a recent debt crisis.
