Emerging-Market Stocks Rebound as Commodities Post Weekly Gain

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  • Stocks, currencies rise on bets dollar rally has gone too far
  • Hong Kong-traded Chinese shares cap best week in four months

Why Rising Treasury Yields Add Pressure to EM Currencies

Emerging-market stocks posted their first weekly gain in more than a month as investors returned to riskier assets amid an advance in commodity prices and bets that a rally in the U.S. dollar has gone too far.

Indian equities led the advance Friday, pushing the benchmark index to a two-week high. Developing-nation stock volatility dropped to a 15-month low. An index of Chinese shares traded in Hong Kong capped its best week since July 15. India’s rupee rebounded from a record low reached on Thursday. The risk premium for emerging-market Eurobonds narrowed. Turkish bonds and the lira retreated after the country’s surprise interest-rate increase Thursday.

Developing-nation assets are clawing back some ground after a four-week slump driven by a surge in the dollar and expectations that the Federal Reserve will start raising U.S. interest rates at a faster pace. Commodity and energy producers led the recovery. The Bloomberg Commodity Index jumped 2.4 percent in its best week since August, while Brent crude prices rose for the second week in a row.

“The general mood has gotten a little less negative,” said Koon Chow, a strategist at Union Bancaire Privee Ubp SA in London. “But I think people are still in their early stage of rekindling their bad dollar romance, which in turn means emerging-market currencies may remain under some more pressure. This isn’t the precursor to a sustainable rebound.”

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  • The MSCI Emerging Markets Index gained 0.4 percent to 855.78, extending the weekly advance to 1.3 percent.
  • A gauge of developing-nation currencies was little changed both on the day and on the week
  • The Hang Seng China Enterprises Index advanced for a sixth day, climbing 1.2 percent. The gauge has jumped 4.7 percent this week, the most since the period ended July 15. 
  • The Hungarian forint appreciated 0.2 percent against the euro, the best performance in developing Europe against the single currency

    Read: Trump Invited Me to U.S., Hungary’s ‘Black Sheep’ Orban Says

  • The rupee strengthened 0.4 percent after sliding to a record 68.8625 per dollar on Thursday
  • Brazil’s real depreciated 0.5 percent
  • The Turkish lira fell 0.1 percent, extending a weekly drop to 2.3 percent

    Read: Turkey Rate Hike Fails to Compensate for Risk as Lira Slides