Emerging Currencies Rise Fifth Day as Minutes Spur Fed Rate Bets

  • Bloomberg FX index rise to an eight-week high after minutes
  • Ruble appreciates to strongest since late July as oil rallies

Emerging-market currencies rose for a fifth day as minutes from the Federal Reserve’s September meeting stoked speculation that policy makers will move slowly to raise the near-zero U.S. borrowing costs that have bolstered demand for riskier assets in developing nations.

A Bloomberg gauge of 20 currencies rose 0.8 percent to an eight-week high against the dollar. The MSCI Emerging Markets Index fell 0.3 percent to 848.37 after rising as much as 0.2 percent.

Currencies extended gains after minutes from Sept. 16-17 session of the Federal Open Market Committee showed policy makers refrained from an interest-rate increase because of growing risks to their outlook for growth and inflation, mainly from China. The MSCI developing-nation stock gauge rose 9.6 percent in a six-day rally through Wednesday that was driven in part by speculation that the U.S. monetary authority will hold off on raising borrowing costs until next year.

“You saw in the minutes a real reflection that global headwinds had worsened the outlook,” Emma Dinsmore, chief executive officer of R-Squared Macro Management LLC, said by phone. “As long as markets expect the Fed to delay, the more you’re going to see this optimistic, cautious rally across emerging markets.”

Russia, Brazil

Russia’s ruble rallied 2.1 percent against the dollar as oil, the country’s biggest export, rose to a six-week high in London. The premium investors demand to own emerging-market debt over U.S. Treasuries narrowed two basis points to 404 basis points, according to JPMorgan Chase & Co. indexes.

Brazil’s real strengthened 2.6 percent as a court ruling that put President Dilma Rousseff a step closer to facing impeachment spurred bets that a new leader would be better suited to shore up the country’s finances and pull it out of a recession. The Ibovespa stock benchmark rose 0.4 percent to the highest level since Aug. 10.

Sberbank PJSC rose 4.3 percent in Moscow, buoying the Micex Index, which increased 0.6 percent. BCS Financial Group raised the Russian state-controlled lender to buy from hold, saying it expects the bank’s 2015 profit to exceed analysts’ estimates. The ruble strengthened to 61.37 per dollar as Brent crude rallied to $53.05 a barrel.

Samsung Surge

The MSCI developing-markets index has slid 11 percent this year and trades at 11.3 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has fallen 2.7 percent in 2015 and is valued at a multiple of 15.5.

Eight of the ten industry groups in the emerging-market stock gauge fell Thursday, led by a 0.9 percent drop in energy shares. A measure of technology shares increased 0.4 percent, propped up by a 1.5 percent gain in Samsung Electronics Co. The shares have surged 14 percent in the last three days as a revamped smartphone lineup and a renewed focus on components gains traction.

Indian stocks slumped, sending the S&P BSE Sensex Index down 0.7 percent. Reliance Industries Ltd., owner of the world’s largest refining complex, fell the most on the gauge, retreating 2.7 percent after a report on ET Now television that the company may face a 120-billion rupee ($1.8 billion) penalty from the government. The station cited oil ministry officials that it did not identify.

China Advance

The Hang Seng China Enterprises gauge lost 1 percent, after surging 11 percent while mainland markets were closed.

The Shanghai Composite posted the steepest advance in three weeks as traders returned from a week-long holiday. Policy makers are increasing targeted stimulus as five interest-rate reductions since November failed to reverse an economic slowdown. The government lowered a property down-payment requirement for the first time in five years on Sept. 30 after cutting a tax on passenger-vehicle purchases.

Before it's here, it's on the Bloomberg Terminal.