All Emerging-Market Currencies Fall as U.S. Dollar Extends Rally

JOHANNESBURG (Capital Markets in Africa) – U.S. dollar left every emerging-market currency in the red on Wednesday as stocks retreated.

Russia’s ruble led losses after crude oil slumped and U.S. representatives mulled new sanctions against the country. The Chinese yuan sank to the lowest level since August 2017, bolstering speculation that officials are comfortable with currency weakness. Mexico’s peso posted the biggest decline among Latin American peers, trimming its advance from the July 1 presidential election. The yield on emerging-market hard-currency debt reached 5.67 percent on Tuesday, more than the average yield since the end of 2008.

“We are in a rainy period and just like in farming, rain is essential for the plants to bear fruit,” said Luc D’Hooge, the Zurich-based head of emerging-market bonds at Vontobel, whose $2.7 billion fund beat 95 percent of peers over the past three years. “Regardless if this period of rain lasts six months or twelve, we remain confident that the weather will change and, once again, long-term investors will reap the profits from their harvest.”

Traders pushed down the value of developing-nation assets as the dollar outperformed most of its major peers after Federal Reserve Chairman Jerome Powell said the central bank will continue to gradually raise interest rates “for now.” However, he also warned that trade protectionism could hurt economic growth and potentially undermine wages. More than half of market participants expect the selloff in developing-nation stocks and currencies to continue, according to a Bloomberg survey of 20 investors, traders and strategists.

Source: Bloomberg Business News