Emerging Assets Climb as Dollar Trump Trade Takes a Breather

  • South African rand rallies amid calls for Zuma to resign
  • Equity benchmarks in Turkey, Hong Kong and Taiwan advance

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Emerging-market currencies posted their biggest advance in more than nine weeks as investors bet the so-called Trump trade, which has bolstered the U.S. dollar, was overdone.

The South African rand, Turkish lira and Colombian peso were the best performers among developing-nation currencies. Brazil’s real rose against the dollar for the first time in five days. A gauge of emerging-market equities trimmed its loss since Donald Trump’s surprise U.S. presidential win to less than 5 percent. U.S. bond yields fell, leading investors to return to the higher-returning assets they abandoned amid speculation Trump’s policies would fuel inflation and spur rate hikes.

“The whole U.S. curve has come down since Friday morning and that’s the main support,” said Simon Quijano-Evans a strategist at Legal & General Group Plc in London, who predicts more volatile currencies such as the lira and real will be hardest hit if the trend reverses. “The backdrop looks more positive than last week.”

The MSCI Emerging Markets Currency Index rose 0.4 percent, its biggest gain since Sept. 22. A gauge of developing-nation equities climbed for a second day, adding 0.9 percent, as raw-material and information-technology stocks led gains.

  • Inflows to U.S.-listed exchange-traded funds buying emerging-market stocks and bonds totaled $357 million last week, reversing three weeks of losses that reached $3.92 billion
  • The rand jumped 3 percent to 13.7057 per dollar. At least three members of South Africa’s cabinet have called on President Jacob Zuma to step down or for the ruling party’s National Executive Committee to vote to remove him, News24 reported
  • Turkey’s lira strengthened 1.1 percent, ending a four-day slide that pushed it to a record-low 3.4766 per dollar
  • Yields on Poland’s 10-year bonds fell for a third day, dropping five basis points to 3.50 percent. Detailed gross domestic product data is due on Wednesday with GDP forecast to grow 2.4 percent in the fourth quarter and 3.1 percent in the following three months, according to a Bloomberg survey
  • The yield on South Africa’s 10-year government bonds declined 21 basis points to 8.88 percent, while the rate on Turkey’s 10-year notes slipped 21 basis points to 11.08 percent
  • The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, dropped 0.3 percent, retreating for a second day
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