Emerging markets retreat from three days of wins
investmentnews.comDeveloping-world currencies were mixed on Tuesday as traders awaited key speeches and data that could shed light on the outlook for US interest rates while losses in Hong Kong-listed tech stocks drove emerging-market equities lower.
MSCI’s main emerging-market stock index fell 0.9%, breaking a three-day winning streak that had taken the gauge to a seven-month high. A key index for currencies was little changed as Peru’s sol, Hungary’s forint and South Africa’s rand led gains. Chile’s peso fell the most amid expectations for more interest rate cuts and weaker prices for the country’s top export copper.
Losses in US technology giants damped risk-taking across markets ahead of congressional testimony by Jerome Powell on Wednesday and Thursday, during which the Federal Reserve chair is expected to reiterate the lack of urgency for rate cuts. On Friday, US non-farm payrolls figures will also be closely watched. Emerging-market currencies have gained since mid-January on hopes that the central bank will start cutting interest rates soon.
“They’re going to keep us guessing for the short term,” said Juan Perez, director of trading at Monex USA. “Now finally people are getting out of that mentality that there’s going to be a dovish Fed or that the Fed is saying one thing and that message is not entirely how they’re going to act later.”
A JPMorgan index for currency volatility in emerging markets is near a four-year low, effectively freezing investors in place as they refrain from exiting positions that stand to benefit from the Fed’s cuts.
Mexico’s peso firmed to its strongest since mid-January after breaking through the 17 per-dollar level on Monday, but pared back gains to trade little changed on the day. Hungary’s forint
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