EM cur­ren­cies gain against weak dol­lar; eq­ui­ties steady

Gulf Times Business - - BUSINESS -

Emerg­ing mar­ket cur­ren­cies gained against a soft dol­lar yes­ter­day as US Trea­sury yields slipped, while de­vel­op­ing world shares stead­ied as a rally af­ter the US- China trade truce pe­tered out.

The fall in US trea­sury yields from a pos­si­ble pause in the US Fed­eral Re­serve’s rate- hike cy­cle and an in­ver­sion in the US yield curve for the first time in more than a decade spurred con­cerns about a pos­si­ble re­ces­sion. Ris­ing US bor­row­ing costs had re­duced the at­trac­tive­ness of riskier emerg­ing mar­ket as­sets ear­lier this year, lead­ing to cap­i­tal flows out of many de­vel­op­ing coun­tries, but a dovish stance from the Fed last month sent emerg­ing mar­ket cur­ren­cies and shares to 2018- highs in Novem­ber. “One of the reasons why emerg­ing mar­kets sold off this year was be­cause of ris­ing rates in the US and in­creas­ing Trea­sury yields.

That ( lower US yields) in the­ory should pro­vide a bit of a life­line to emerg­ing mar­kets,” said Gareth Leather, se­nior economist at Cap­i­tal Eco­nom­ics.

Most de­vel­op­ing world cur­ren­cies gained, with the Chi­nese yuan lead­ing the rally, up 0.7% and South Korea’s won hit­ting its high­est since June.

South Africa’s rand firmed more than 1%, hov­er­ing near four- month highs. Africa’s most in­dus­tri­alised econ­omy ex­panded 2.2% in the third quar­ter, snap­ping out of re­ces­sion af­ter a re­vised 0.4% con­trac­tion in the sec­ond quar­ter, data showed.

The Rus­sian rou­ble and stocks on Moscow’s main in­dex firmed on higher oil prices be­fore this week’s Or­gan­i­sa­tion of Petroleum Ex­port­ing Coun­tries ( Opec) meet­ing, while in­vestors kept an eye on naval ten­sions be­tween Moscow and Kiev. Cur­ren­cies of net crude im­porters such as the Turk­ish lira,, In­dia’s ru­pee and the In­done­sian ru­piah slipped, as oil prices rose by more than 1%.

In eq­ui­ties, the MSCI’s in­dex for emerg­ing mar­ket shares rose marginally with China and Hong Kong stocks los­ing steam as the US- China rally faded and as the Chi­nese econ­omy con­tin­ues to slow down.

An­a­lysts say the 90- day USChina trade truce has only bought a bit more time for wran­gling over deeply di­vi­sive trade and pol­icy dif­fer­ences. “Our global fore­casts point to the trade war in­ten­si­fy­ing and sort of re- es­ca­lat­ing next year... so you may get a short term re­bound but it is not likely to last that long,” said Cap­i­tal Eco­nom­ics’ Leather. In East­ern Europe, the Czech crown gained marginally against the euro. Data showed the av­er­age real monthly wage in the coun­try rose in the third quar­ter.

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