Sao Paulo: Emerging-market stocks and currencies were little changed after US economic data bolstered the case for higher interest rates that could dim investors’ appetite for riskier assets. Mexico’s peso and Turkey’s lira rose.
Shares and currencies in emerging-markets struggled to find direction yesterday as traders boosted wagers the Federal Reserve will raise borrowing costs by its March meeting. Bears point to the so-called taper tantrum of 2013, when local-currency bonds in developing nations tumbled after then Chairman Ben Bernanke signaled prospects for reduced stimulus.
The bullish argument is that the asset class is currently on stronger footing, with economists predicting Brazil and Russia digging themselves out of recessions.
Still, emerging-market currencies enjoyed their longest stretch of weekly gains in 20 months and stocks rallied 1.7 percent in five days.
Mohamed El Erian, Allianz SE’s chief economic adviser, told Bloomberg TV that investors willing to withstand short-term price swings would do well to bet on a rebound of currencies outside the world’s largest economies. Meanwhile, Goldman Sachs Group Inc defied bearish bets and predicted Mexico’s peso will make a comeback this year.
"If you have appetite for lots of volatility and you are able to maintain your position, then foreign exchange in emerging markets is attractive,” El Erian said. MSCI Emerging-Market Currency Index was little changed yesterday, posting a 0.6 percent increase for the week.
Sixteen out of the 24 developing-nation currencies tracked by Bloomberg fell, led by Brazil’s real and Colombia’s peso. The Mexican peso led gains among the world’s major peers, rebounding from a record low reached earlier this week.
Turkey’s lira erased losses after the central bank said it will limit commercial lenders’ borrowing through interbank money markets. The Ukrainian Hryvnia weakened to the lowest since February 2015.
MSCI’s gauge of developing-nation stocks fell less than 0.1 percent, trimming this week’s advance to 1.7 percent. Russia’s dollar-denominated RTS Index dropped the most among major peers. Brazil’s Ibovespa index halted a four-day rally as Petrobras’ shares slumped with oil.
