Emerging Currencies Resume Advance as Raw-Material Prices Rally

  • South African rand, Brazilian real lead currencies gains
  • Oil rebounds on stronger demand, lower U.S. production

Developing-nation currencies resumed their advance, rising for the seventh time in eight days as commodity prices rebounded and concern eased that China’s economic slowdown will damp global growth.

The real strengthened the most, rallying 1.8 percent as Brazilian inflation slowed more than forecast, fueling bets that policy makers may have room to cut borrowing costs that are the highest in 10 years. The currencies of raw-material exporters including South Africa, Chile and Mexico each gained at least 0.9 percent. The MSCI Emerging Markets Index of developing-nation stocks ended the session little changed after erasing a 0.3 percent gain.

A Bloomberg gauge of 20 developing-nation exchange rates has rebounded 5.6 percent from a record low on Jan. 20 while stocks narrowed this year’s decline to less than 1 percent as commodity prices stabilized and China stepped up economic stimulus. Emerging-market assets retreated Tuesday after trade data showed Chinese exports slowed.

“Wall Street is way ahead of itself in discounting negative fundamentals, pushing down emerging markets too much,” said John Manley, who helps oversee about $233 billion as chief equity strategist for Wells Fargo Funds Management in New York. “I still think emerging markets are a great place to be if you are patient.”

The currencies gauge increased 0.7 percent Tuesday to the highest level since early December. The Bloomberg Commodity Index climbed 1.3 percent. Brent crude rose $1.42 to $41.07 a barrel, settling at more than $40 for just the second time this year.

Currencies

The South Korean won weakened 0.8 percent to 1,216.19 per dollar. The nation’s central bank will review monetary policy Thursday, and seven out of 18 economists surveyed by Bloomberg forecast the benchmark interest rate will be cut from a record-low 1.5 percent.

Brazil’s real advanced to 3.6898 per dollar, the strongest level since November. Rallying commodity prices and mounting speculation that President Dilma Rousseff will be impeached have helped drive an 8.9 percent rally in the country’s currency this month, the most in emerging markets.

The yuan fell 0.1 percent to 6.5130 per dollar in onshore trading in Shanghai after the central bank weakened the daily fixing.

The rupee fluctuated as investors saw potential inflows from a sale of government shares in Container Corp. Turkey’s lira strengthened 0.8 percent, the most in a week, and the ruble advanced 0.5 percent as oil rose.

Stocks

China’s Shanghai Composite Index slumped 1.3 percent, halting a six-day gain, while the Hang Seng China Enterprises Index of mainland shares listed in Hong Kong dropped 0.8 percent. India’s S&P BSE Sensex Index climbed 0.6 percent to a five-week high.

The Ibovespa benchmark fell 0.9 percent in Sao Paulo as Brazil’s largest banks led losses, with Banco Bradesco SA leading the gauge lower. State-controlled oil producer Petroleo Brasileiro SA gained 1.7 percent.

The MSCI developing-nation stock benchmark trades at 11.4 times projected 12-month earnings. The MSCI World Index of developed-nation shares is valued at a multiple of 15.5.

The yield on South Korean 10-year government notes fell for a third day to 1.85 percent, the lowest in a week. The yield on similar-maturity Russian government bonds rose two basis points to 9.24 percent. Moody’s Investors Service said Wednesday that it will stop issuing local ratings on Russian companies and shutter a credit grading joint venture with Interfax.

The average extra yield investors demand to hold emerging-market bonds instead of U.S. Treasuries narrowed six basis points to 424, according to JPMorgan Chase & Co. indexes.

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