MSCI’s index for emerging-market equities rose 1.3%, with exchanges in Taiwan and South Korea partially recouping some of their losses.
“It seems that what we saw yesterday was just some panic,”said Marco Oviedo, a strategist at XP Investimentos in Brazil.
“EM sentiment seems to be cautious, probably waiting for more US data on the activity front.”
A broad gauge of developing-nation currencies dipped about 0.1%. But Latin American currencies strengthened with the Brazilian real rising sharply on expectations that country’s central bank could lift borrowing costs in the coming months just as the US is seen lowering interest rates.
Mexican peso, one of the currencies hit hardest by the Japanese yen’s rally and an unwinding of carry trade strategies, also gained.
Traders, however, remained cautious as they attempted to measure just how much further currencies could slump if the yen keeps gaining ground.
JPMorgan Chase & Co. warned that the unwind has more room to run as the yen remains one of the most undervalued currencies.
“As long as there is belief that Japan will be an isolated safe-haven to go to in order to escape the chaotic environment we are in, this phenomenon will continue,” said Juan Perez, director of trading at Monex USA.
The unwinding of the carry trade is a “double hit” for Latin American currencies, he said, along with data that points
to weakness in the economies of the US and China, the region’s top trading partners.
The selloff in stocks on Monday added to losses that began on Friday and sent the MSCI index below its 200-day moving average for the first time since January. The index traded below the level Tuesday.
“It’s reasonable to see some kind of a bounce after the rapid selloff over the past few sessions,” said Vey-Sern Ling, managing director at Union Bancaire Privee in Singapore. “Having said that, with US economic growth set to slow in the second half, election uncertainty, and still-stretched valuations, it would make sense for investors to use any technical rebounds to reposition.”
Taipei’s benchmark index, which slumped the most since 1967 Monday, clawed back some of the losses it sustained in the previous two sessions amid doubts about whether profit gains from artificial intelligence would live up to the hype. Share in Taiwan Semiconductor Manufacturing Co. rose around 5% with its US-traded shares after posting an 8% rally in Taiwan.
