Emerging Currencies Rise With Stocks as India’s RBI Boosts Rupee

Developing-nation currencies strengthened, with the rupee snapping a three-day slide, after India’s central bank unexpectedly raised interest rates. The MSCI Emerging Markets Index rose from a four-month low.

The rupee climbed 0.3 percent versus the dollar, while South Africa’s rand halted a four-day loss and the South Korean climbed from a four-month low. Turkey’s lira added 0.4 percent before a central bank meeting. The MSCI gauge of developing nations rose 0.4 percent to 934.92 as of 2:17 p.m. in Hong Kong.

Currencies from India to Turkey and Brazil have retreated this year, putting pressure on central banks to stem declines as reduced Federal Reserve stimulus and signs of slowing economic growth in China erased more than $520 billion from emerging-market equities. The Fed starts a two-day meeting today as economists forecast a further cut to its monthly bond purchases.

“Concerns of a contagion among emerging markets and that the U.S. will accelerate tapering are overblown,” Allan Yu, chief investment officer at Metropolitan Bank & Trust Co., which manages $8 billion, said by phone in Manila. “Valuations in some emerging markets are attractive.”

The MSCI Emerging-Markets Index has slumped 6.7 percent this year, dragging valuations to the lowest level since August. The gauge’s loss this year exceeds the 3.4 percent decline in the MSCI World Index of developed nations, which trades at 14.3 times 12-month estimated earnings.

Bank Meeting

The lira strengthened for a second day on bets the central bank will raise interest rates at a meeting today. The lira erased losses yesterday after the central bank said it will “take the necessary policy measures for price stability.”

The S&P BSE Sensex headed for the lowest close since Dec. 17. Governor Raghuram Rajan boosted the repurchase rate to 8 percent from 7.75 percent, the Reserve Bank of India said today. Only three of 45 analysts in a Bloomberg News survey predicted the move, with the rest expecting no change.

Daewoo Engineering & Construction Co. surged 8.8 percent in Seoul, the largest gain in the MSCI Emerging Markets Index, after forecasting an operating profit this year. South Korea’s Kospi index added 0.3 percent, ending a three-day loss.

Nine out of 10 industry groups in the developing-nation gauge advanced today, led by consumer-discretionary companies. Hyundai Mobis Co., an auto parts supplier, rallied 3.6 percent in Seoul after Hyundai Securities Co. increased its share-price estimate to 380,000 won from 360,000 won.

Hanergy Solar Group Ltd. (566), a renewable-energy producer, jumped 6.6 percent in Hong Kong after saying it will receive $780 million of contracts.

Indonesia’s Jakarta Composite Index increased 0.7 percent, rebounding from a five-month low, while the FTSE Bursa Malaysia KLCI Index halted a four-day loss.

To contact the reporter on this story: Ian Sayson in Manila at isayson@bloomberg.net

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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