(Bloomberg) — Emerging-market currencies are breaking a three-day losing streak, with the MSCI index gaining as much as 0.2% as the dollar rally wavered on Thursday.
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Most currencies from developing nations were advancing, led by the South African rand and the Czech koruna. In Latin America, currencies fluctuated between gains and losses as the market continues to brace for the possibility of a second Donald Trump presidency in the US. The Brazilian peso was trailing regional peers, while the Colombian peso recovered from yesterday’s losses amid domestic political noise.
“The uncertainty ahead of the US elections seems likely to keep risk markets a bit shaky and LatAm currencies seem destined to continue to test these technical lows until there is more clarity on the election outcome,” BBVA analysts led by Alejandro Cuadrado wrote in a note to clients.
Despite Thursday’s advance, the MSCI EM currency index was on course for the biggest monthly decline since February 2023. Meanwhile, emerging stocks are headed for the longest losing streak since before the Federal Reserve’s interest-rate cut last month as nervousness around the US presidential election and disappointment over China’s stimulus efforts pushed investors away from riskier assets.
The MSCI EM stock index was down for a fourth day, extending its decline to a one-month-low. Losses were being led by shares in consumer discretionary and staples companies.
With two weeks to the US election, investors are rushing to price in the possibility of a win for Republican candidate Donald Trump, who has pledged to raise import tariffs. Political jitters are worsening sentiment that’s already marred by the failure of China’s repeated stimulus measures to sustainably perk up the market, the war in the Middle East and volatility sparked by a strong dollar and rising US yields.
“Risks from the current Middle East conflict, uncertainty around China’s next stimulus steps, and potential obstacles to trade in the aftermath of the US presidential election remain areas of concern” for emerging markets, even though the growth backdrop is benign, UBS Group AG Chief Investment Officer Michael Bolliger and analyst Tilmann Kolb wrote in a note. “We keep a neutral stance in broad EM asset classes, but see attractive bottom-up opportunities.”
