Emerging-Market Currencies Fall; Lira in Worst Rout Since 2008

  • Mexico’s peso drops to record low, erasing a brief advance
  • Stocks in developing nations climb to two-month high

Can Anything Stem the Slide in the Turkish Lira?

Emerging-market currencies dropped as the lira posted its biggest five-day loss since the global financial crisis. Stocks in developing nations rose with commodities.

The Turkish lira was the worst-performer among its major peers as investors said nothing short of higher interest rates will stem its decline after the central bank on Tuesday lowered the level of foreign-exchange reserves it requires commercial lenders to hold. A gauge of developing-nation stocks rose to a two-month high, led by raw-material producers. Traders also watched Donald Trump’s first press conference as U.S. president-elect, which spurred a brief bout of volatility on financial markets.

Currencies

  • The MSCI Emerging Markets Currency Index fell 0.4 percent at 4 p.m. in New York.
  • Turkey’s lira weakened 2 percent to a record low of 3.8646 per dollar.
  • Mexico’s peso slid 0.2 percent to another all-time low of 21.8574; it fluctuated during Trump’s press conference.
  • Brazil’s real dropped 0.1 percent; after the close, policy makers unexpectedly slashed the benchmark interest rate by three-quarters of a point as they seek to jumpstart the country’s stagnant economy.

Stocks

  • The MSCI Emerging Markets Index added 0.1 percent, rising for a second day.
  • South Korea’s Kospi Index rose 1.5 percent, leading gains among major peers.
  • Brazil’s Ibovespa Index advanced 0.5 percent; miner Vale SA and oil giant Petroleo Brasileiro SA contributed the most to the increase.
  • Argentina’s Merval Index halted a 10-day rally.

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Analysis

  • TURKEY: “A hike of 200 basis points would probably be insufficient as exchange rates and rates markets are already pricing in more than that,” said Mark Cudmore, a strategist and former currency trader who writes for Bloomberg.
  • MEXICO: Trump’s press conference shows he hasn’t softened his stance on Mexico, which should continue putting pressure on the peso, said Win Thin, head of emerging-market currency strategy at Brown Brothers Harriman.
  • BRAZIL: The central bank “made it very clear that it sees a better inflation and exchange rate outlook and worse activity which made them opt for a more aggressive cut,” said Luciano Rostagno, the chief strategist at Banco Mizuho.
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