by Matthew Burgess and Andras Gergely
Emerging-market assets advanced as the dollar weakened and Chinese factory profit data pointed to a stabilizing economy.
The index tracking emerging-market currency returns rose 0.3% on Monday, heading for its first gain in more than a week, while the equivalent gauge for stocks added more than 1%. The Korean won led currencies higher as foreign investors bought the nation’s stocks while Chinese tech shares led equities higher. The yuan gained 0.2% against the dollar, its biggest rise in a month.
Sentiment improved after China reported its first gain in industrial profits in four months and factory deflation eased, suggesting policies to tackle overcapacity are starting to take hold ahead of a week-long holiday. Currencies also drew support from a weaker dollar as focus shifts to US jobs data and the risk of a government shutdown.
“The jump in industrial profits in August definitely improved the risk sentiment,” said Alex Loo, a macro strategist at TD Securities in Singapore. That could help bolster yuan strength ahead and lift Asian currencies, he added.
The dollar fell for a second day as traders looked to this week’s US employment data for clues on the Federal Reserve’s rate-cut path after its preferred inflation gauge matched forecasts Friday. Gains in Asian currencies may be short-lived if a government shutdown delays the jobs report and fuels uncertainty, according to Skandinaviska Enskilda Banken AB.
“We must be careful of Asian currencies in the coming days,” said Eugenia Fabon Victorino, head of Asia strategy at SEB in Singapore. “With China about to enter the Golden Week, USD/Asia will be exposed to the whims of the dollar by Wednesday.”
The Israeli shekel rose the most in more than a month before a meeting between Prime Minister Benjamin Netanyahu and US President Donald Trump on Monday. The meeting comes after the US leader shared a proposal aimed at concluding the Israel-Hamas conflict with other regional heads in New York last week.
Conditions are also turning positive for central European currencies, ING Bank strategist Chris Turner said. Upcoming elections in the Czech Republic and Tuesday’s Polish inflation figures will be among the developments in focus for investors.
The zloty, forint and koruna were little changed against the euro in early trade on Monday, while they followed the European common currency slightly higher against the dollar.
Primary market activity flared up in the Middle East and North Africa. That included mandates for potential benchmark sales from Kuwait and Egypt, while Algeria is nearing its first-ever sovereign sukuk issuance to help address a widening budget deficit.
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