Emerging Currencies Rebound as Traders Focus on Trump-Xi Meeting
(Bloomberg) -- Emerging-market currencies rebounded fromearlier losses as the dollar trimmed its advance, with thisweek’s high stakes meeting between the US and Chinaovershadowing recent US data showing a resurgence in inflation.
The MSCI EM currency index gained 0.1%, with Latin American currencies and the South African rand leading the advance. The dollar had earlier gained after hotter-than-expected US producer prices prompted money managers to revise their bets for a Federal Reserve rate hike by the middle of next year.
Among the best performers, the Chilean peso strengthened 1.1% against the dollar, buoyed by a rally in copper prices. The commodity extended gains above $14,000 a ton, setting another record close as supply risks mount from mine disruptions around the world.
It’s “a choppy day, but at the end the commodities component is weighing more, which seems positive EM, along with some risk on sentiment in the US,” said Marco Oviedo, senior strategist at XP Investimentos.
Trump arrived in Beijing today for the first state visit to China by a US leader in nine years. The world’s two largest economies are looking to stabilize ties with a summit playing out against the backdrop of the Iran war, with their face-to-face meeting expected Thursday morning.
EM gains “seem to be indicative of optimism that the sudden Trump-Xi Jinping summit will materialize into something that alleviates markets and takes them off the edge,” said Juan Perez, senior director of trading at Monex USA.
Reuters reported that the US and China are weighing a potential framework whereby each country identifies some $30 billion in goods on which tariffs could be eased without threatening national security interests. That offered some relief to the dollar.
Meanwhile, emerging market stocks rose, driven higher by a turnaround in South Korean tech and growing investor confidence in AI companies.
The benchmark MSCI EM equity index gained 0.5% as Korean stocks rallied to a record on a closing basis, bouncing back after losses on Tuesday triggered by a top policymaker’s suggestion that citizens should be paid a “dividend” out of AI profits. The Kospi index rose 2.6% as SK Hynix and Samsung Electronics surged.
Korean President Lee Jae Myung said his adviser’s viral social media post about redistributing profits from the AI boom was meant to start a broader public debate. There was no suggestion that company profits would be used to fund such payments, he said.
Reporting by Selcuk Gokoluk and Leda Alvim