UniCredit Sees Staying Power in Emerging-Market Currencies Rally

  • South African rand, Russian ruble to do well in coming weeks
  • Turkish lira will continue to lag behind emerging-market peers

Currencies of emerging markets, particularly those of commodity exporters, are poised to rebound further, according to UniCredit Bank AG.

South Africa’s rand will extend gains of 8 percent against the dollar in the past month, the strongest performance among developing-nation currencies, according to the strategists. Russia’s ruble, which has advanced more than 13 percent since touching a record low on Jan. 21, should also “do well,” UniCredit said.

“The emerging-market currencies risk-sentiment tide is turning,” UniCredit’s London-based strategists Kiran Kowshik and Vasileios Gkionakis wrote in an e-mailed report today. “This may have legs to run on.”

The rally will probably last in the weeks ahead amid signs commodity prices are stabilizing led by metals. Stagnating global growth means the Federal Reserve will hesitate before it raises interest rates again, according to the report. In the past month, 19 of 24 emerging-market currencies have strengthened against the dollar, including gains of more than 3 percent for the ruble and Brazil’s real.

UniCredit also pointed to risks, saying a deeper devaluation of the yuan or a further selloff in equities would temper appetite.

The strategists recommend betting on the rand versus the Turkish lira, as well as the lower-yielding dollar, euro and Japanese yen, according to the note published Monday.

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