EMERGING market currencies firmed yesterday and were headed for a sixth consecutive weekly advance, capitalising on weakness in the US dollar due to nervousness about US fiscal health.
The MSCI index of emerging market currencies climbed 0.3 per cent. It is up 0.5pc this week, on course to secure its longest weekly winning streak in a eight months.
This bullish turn was largely fuelled by a depreciating US dollar, which was poised to break a four-week run of gains.
The dollar’s softness came as global markets continued to grapple with the long-term fiscal implications of President Trump’s tax cut package, a plan anticipated to add a hefty $3.8 trillion to the US debt.
The debt concerns and a simmering tariff war persuaded investors to reduce their exposure to US assets and find alternatives in emerging markets to diversify their portfolios.
“EM carry trades have come back into focus given the current backdrop of lower recession risk and smaller tails. The latest market dynamics imply that USD should be a more attractive funding currency than usual (despite the lower carry), while EUR should be a less attractive one,” Goldman Sachs said in a note.
The MSCI emerging markets stocks index gained 0.5pc, but was on course for 0.5pc weekly drop, which would end its longest weekly winning streak in over three months.
In central and eastern Europe, Romania’s leu and its benchmark stock index were both on course for their strongest weekly performances in over 2-1/2 years.
These gains were driven by Nicusor Dan’s victory over a hard-right eurosceptic opponent in a recent presidential election.
President-elect Dan now shoulders the task of appointing a prime minister capable of assembling a team to navigate the country’s weak public finances, and sidestep a potential sovereign rating downgrade.
Meanwhile, Hungary’s forint fell 0.34pc against the euro after data showed the country’s unemployment rate rose to 4.4pc in February-April, from 4.3pc in January-March.
Budapest stocks jumped over 1pc after four successive sessions of losses.
The Polish zloty slipped 0.3pc as political uncertainty prevailed ahead of a second round of the presidential election on June 1.
Equities had come under pressure earlier this week after pro-European Union candidate Rafal Trzaskowski secured a narrower-than-anticipated lead over right-wing candidate Karol Nawrocki in Sunday’s first round vote.
A broader gauge for the region’s stocks was set for its second consecutive weekly loss.
In Asia, Singapore’s benchmark index slipped 0.3pc while its currency rose 0.5pc against the US dollar after data showed its key consumer price gauge came in above expectations in April.
Meanwhile, Philippines’ benchmark index logged its strongest intraday percentage gain in nearly a month after its central bank said it has room for two more rate cuts in 2025.
&uuid=(email))