An MSCI index of developing FX was little changed with gains in China’s onshore and offshore yuan offsetting declines elsewhere. Eastern European currencies like Poland’s zloty and Hungary’s forint led losses, falling more than 1% against the greenback. A measure of dollar strength is up as much as 1.1%, the biggest intraday jump in more than a month.
The developments in China-US talks are certain to bring relief to traders who were bracing for the possibility that a spiraling trade war between the two largest economies would
ignite a global recession. The pair will lower trade levies on each other’s products for 90 days, according to a joint statement released in Geneva.
“There is a renewed sense of faith in the US dollar as cooperation with China is welcome news,” said Juan Perez, director of trading at Monex USA. “We foresee the dollar making a strong comeback that will also correlate with positivity surrounding equities.”
Traders will keep an eye on more developments between the two nations as US President Donald Trump said he would likely speak to Chinese leader Xi Jinping later this week. Also in focus is the Federal Reserve, with investors now pricing in just two interest rate reductions for 2025.
In equity markets, an index of emerging-market stocks is set to close at its highest level since October. The gauge rose some 1.9%, led higher by equities in Hong Kong and South Korea including Tencent Holdings Ltd., Alibaba Group Holding Ltd. And Samsung Electronics Co. Ltd.
Elsewhere, efforts to halt regional conflicts added to risk sentiment. India and Pakistan agreed to an immediate ceasefire over the weekend, prompting a surge in stocks. The NSE Nifty 50 Index jumped more than 3% in Mumbai, while Pakistan’s benchmark stock index climbed 9.3%.
The news bodes well for Indian and Pakistani markets though “reports of violations within a few hours of the ceasefire announcement may cast some doubt on its sustainability,”
Barclays Plc strategists including Avanti Save wrote in a note to clients. “Assuming both sides adhere to the ceasefire, we expect risk assets in both India and Pakistan to deliver a
relief rally.”
In credit markets, sovereign bonds from Ukraine were also among the biggest gainers. Volodymyr Zelenskiy is challenging Vladimir Putin to engage in talks this week, with the Ukrainian leader traveling to Istanbul on May 15 for direct negotiations.
