Emerging currencies rounding out record month as stocks rally

Emerging-market currencies are set to round out the strongest monthly rally on record as commodities rebounded and the dollar weakened. A Bloomberg index tracking 20 exchange rates in developing nations rose 0.2 percent to 72.32 as of 9:32 a.m. in London and has climbed 5.8 percent in March. The MSCI Emerging Markets index of shares was little changed on Thursday, but was poised for its biggest monthly increase since October 2011. A more dovish stance by the Federal Reserve has put a U.S. currency gauge on course for its steepest monthly loss since 2010.

Fed Chair Janet Yellen indicated a gradual pace for U.S. rate increases after December's first monetary tightening in a decade spooked investors and spurred outflows from developing markets. This month, overseas investors have poured $12 billion into equities in India, South Korea, Taiwan and Thailand, exchange data compiled by Bloomberg show. And the biggest monthly increase in Brent crude in almost a year has driven rallies in currencies of oil producers such as Russia's ruble and Malaysia's ringgit.

"The Fed isn't expected to hike anytime soon, which has dampened the dollar's strength," said Charlie Lay, a foreign-exchange strategist at Commerzbank AG in Singapore. "In the short term, we look for consolidation in Asia and emerging-market currencies." All 24 emerging-market currencies tracked by Bloomberg appreciated in March. The Brazilian real and ruble posted the biggest gains and increased more than 10 percent. In North Asia, South Korea's won was the top performer and strengthened 8 percent, while the ringgit's 7 percent rally led in Southeast Asia. Poland's zloty headed the European rankings and advanced 6 percent.

Indonesia's rupiah and the Thai baht headed south, with respective losses of 0.7 percent and 1.2 percent. That's a turnaround from February, when the rupiah topped emerging-market gains.

The Bloomberg emerging-market currency index also rose 4.5 percent in the first quarter, the best since March 2012, and reached the highest level since November. The real, ringgit and ruble crowned the rankings in the three months.

As Brent crude climbed 8 percent in March, energy and materials shares led the month's gains among the 10 industry groups in the MSCI index, which rose 13 percent. The gauge is valued at 1 times its 12-month estimated earnings, compared with 16 for the MSCI World Index, which increased 6.5 percent for the month.