Emerging-market assets extended gains as lower US bond yields, a weaker dollar, and falling oil prices provided relief. MSCI’s EM currency index advanced, with the Hungarian forint leading after central bank officials said the nation could adopt the euro as early as 2031. The Colombian peso dragged peers lower due to its oil exports. A drop in Brent crude eased inflation anxiety, pushing Treasury yields lower.
“Today is a good day for market risk sentiment,” said Ning Sun, senior EM strategist at State Street in Boston. “The combination of those factors benefit EM, in particular oil importers and countries with higher correlation with the US bond markets.”
Investors focused on Brazil, where the post-election rally is expected to extend until the Oct. 25 second-round vote. The real rallied to a five-month high. Elias Haddad at Brown Brothers Harriman said the first-round result gave “momentum” to challenger Flavio Bolsonaro. Traders added over $700 million into BlackRock’s iShares MSCI Brazil ETF.
Policymakers are acting. India is expected to raise rates for the first time in nearly four years. Chile pledged to sell dollars after the peso’s 4% slide. Phoenix Kalen at Societe Generale expects currencies from Brazil, Colombia, India and Indonesia to outperform.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing