Emerging-Market Currencies Get Lift From BOJ as Yen Strengthens

  • South Korea's won gains, leading Asian exchange rates higher
  • South African equities rise as Anglo American rallies

Emerging-market currencies rose to the strongest closing level against the dollar in nine months as the Bank of Japan’s decision to hold back an increase in stimulus buoyed Asian exchange rates along with the yen.

South Korea’s won rose for a second day, leading Malaysia’s ringgit, China’s yuan and Taiwan’s dollar higher. The ruble strengthened for a third day and Russian government bonds rallied as Brent crude sold for more than $48 a barrel. Anglo American Plc jumped 9 percent in Johannesburg as the FTSE/JSE Africa All Share Index climbed the most in two weeks. Indian equities fell as derivative contracts headed for expiry. The MSCI Emerging Markets Index rose for a third day.

Policy makers in Tokyo held off on expanding monetary stimulus, giving themselves more time to assess the impact of negative interest rates. Stocks from Japan to Malaysia tumbled, reflecting disappointment among some investors who had expected more easing. The impact was less pronounced in developing nations outside Asia, with the Federal Reserve’s signal that it’s in no hurry to raise rates boosting a gauge of equities in Europe, Middle East and Africa by the most in a week.

“Bank of Japan’s decisions may not necessarily have ramifications for the wider emerging-market space,” said William Hobbs, the head of investment strategy at the wealth-management unit of Barclays Plc in London. “As worries about commodities and China’s economy get shelved a little bit, gains can continue for another couple of months. Emerging markets are a story most people got too negative about, and assets that got buried are bouncing back.”

U.S central bankers left their policy rates unchanged on Wednesday and reassured investors by repeating signals they will proceed gradually in raising borrowing costs amid slow but steady growth in the economy.

The MSCI Emerging Markets Currency Index climbed 0.7 to the highest closing level since July 29. The gauge has rebounded 8 percent from this year’s low in January.

The won gained 0.9 percent as Japan’s currency jumped 3.1 percent. The won and yen often move in tandem as exporters from both countries compete in many of the same markets. The ringgit appreciated 0.4 percent, the yuan gained 0.3 percent and Taiwan’s dollar rose 0.2 percent.

The ruble strengthened 0.6 percent to 64.719 per dollar. The yield on Russia’s five-year local-currency bonds fell 13 basis points to 9.17 percent. Brent crude added 2 percent to $48.14 a barrel in London.

Stocks Gain

The MSCI Emerging Markets Index added 0.1 percent after falling as much as 0.2 percent. Malaysia’s equity benchmark fell 1 percent. The Micex Index advanced 1.8 percent in Moscow.

The developing-nation equity benchmark trades at 11.9 times the projected earnings of its members, a 26 percent discount to the valuation for advanced-nation stocks in the MSCI World Index.

The South African benchmark rose 0.3 percent in a third day of gains. Anglo American rallied after saying it is selling its niobium and phosphate unit for $1.5 billion in cash. China Molybdenum Co. agreed to buy the division and the transaction is expected to be completed in the second half of this year.

In India, the S&P BSE Sensex retreated 1.8 percent. Traders rolled over 60 percent of the NSE Nifty 50 Index futures contracts to the May series that starts Friday, versus a six-month mean of 57 percent, data show. The expiry of derivatives contracts on the last Thursday of every month is typically accompanied by higher volatility.

The premium investors demand to own emerging-market sovereign debt rather than U.S. Treasuries was unchanged at 390 basis points, according to JPMorgan Chase & Co. indexes.

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