Emerging-Market Stocks, Currencies Decline Amid Fed Hike Bets

  • U.S. jobs report bolsters case for higher interest rates
  • Mexico’s peso beats peers as Banxico intervenes in Asian hours

Emerging-market currencies and stocks trimmed their weekly gains after data showing a stronger U.S. labor market bolstered the case for higher interest rates that could dim the appeal of assets in developing nations.

Traders pushed down the value of assets in emerging markets after the latest signs of strength in the American jobs market spurred a surge in Treasury yields and sent the dollar toward a 14-year high. Mohamed El-Erian said in a Bloomberg TV interview that the labor report will encourage the Federal Reserve to proceed with raising interest rates, though he cautioned that a strong U.S. currency could weigh on growth.

“After the payroll data, traders got more comfortable betting on the Fed raising interest rates,” said Ronaldo Guimaraes, a money manager at Modal Asset Management Ltda in Rio de Janeiro. “This sent the dollar up against major currencies.”

Currencies

  • The MSCI Emerging Markets Currency Index declined 0.5 percent, trimming its weekly gain to 0.4 percent
  • Eighteen out of the 24 developing-nation currencies tracked by Bloomberg weakened, led by Turkey’s lira, which sank to a record low
  • Mexico’s peso was the only currency gaining among its major counterparts as the central bank sold dollars directly to banks to support the currency
  • Brazil’s real halted a three-day advance, while Colombia’s peso posted the longest winning streak since September

Stocks

  • The MSCI Emerging Markets Index fell 0.3 percent; it’s up 2 percent this week
  • Mexican shares led losses among major equity benchmarks, led by Grupo Televisa SAB
  • Brazil’s Ibovespa slid 0.8 percent as miner Vale SA tumbled on a news report that pension fund Funcef is considering selling a stake in the company
  • Shares in Russia also fell, while the equity gauge in the Philippines climbed to the highest level since November

What to Watch

Research

  • Goldman’s Bet on Emerging Currencies Is BRICS Without the ‘C’
  • Credit Suisse Sees CNY Sliding 5.7% to 7.33/USD by Year-End
  • Pimco Looking for More Insulated Economies as Brazil, Argentina
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