Mexican Peso Leads Emerging-Market Gains as Dollar Dips on Trump

  • Mexico’s peso, Russia’s ruble among best-performing currencies
  • Asian currencies may be pressured by Trump policies: HSBC

Does the U.S. Dollar Have Further to Fall?

Emerging-market stocks and currencies headed for the highest levels in almost 11 weeks as U.S. President Donald Trump’s first days in office did little to buoy the dollar.

Mexico’s peso and Russia’s ruble led gains among developing nation currencies on the first full day of trading after Trump’s inauguration on Jan. 20. Egyptian and Saudi Arabian stocks were among the best performers in the equity market.

“While President Donald Trump’s inauguration speech may have boosted morale among those who voted for him and provided his opponents with reasons to condemn him, it lacked sufficient details regarding crucial fiscal and trade policies to reignite the bullish momentum in the dollar,” Piotr Matys, an emerging-market currency strategist at Rabobank, said in a note to clients. Rabobank predicts the greenback will fall to 1.1 against the euro by the end of the year from 1.0729.

Markets Live: No Dollar Support Soon as Yen Leads the Attack

Currencies

  • The MSCI Emerging Markets Currency Index advanced 0.4 percent to the highest level on a closing basis since Nov. 9, the day after the U.S. election.
  • Mexico’s peso advanced 1.4 percent, heading for its strongest level since Jan. 6 on a closing basis.
  • South Africa’s rand added 0.5 percent and Russia’s ruble advanced by 0.6 percent.

Stocks

  • MSCI’s gauge of stocks rose 0.6 percent to the highest level on a closing basis since Nov. 8.
  • Volatility in emerging-market stocks is decreasing. While 30-day price swings on the MSCI Emerging Markets Index have fallen to the lowest level since September, a gauge of expected volatility is at the narrowest since June 2015.
  • Egypt’s EGX 30 Index climbed 2.4 percent, the most among 95 major indexes tracked by Bloomberg.
  • Philippines Stock Exchange PSEi Index jumped 2 percent for its highest close since Oct. 28.
  • South Africa’s FTSE/JSE Africa All Share Index rose 0.6 percent.
  • Outflows from U.S.-listed emerging market ETFs totaled $194.9 million in the week ended Jan. 20, compared with gains of $1.4 billion in the previous period.

What to Watch

  • Israel’s central bank is due to announce its interest rates decision at 4 p.m. in Tel Aviv. No change is expected, according to economist estimates compiled by Bloomberg.
  • For data and events, see Asia Daybook, India Daybook, Taiwan Daybook, Middle East Daybook, Russia Daybook, Africa Daybook, South Africa Daybook.
  • Oil held a two-day advance after OPEC and other producing nations agreed on a way to monitor compliance with their pledged output cuts.

Analysis

  • Asian currencies are likely to maintain a pattern of weakening in the first 100 days after the new U.S. president takes office, especially due to "Trump’s focus on the economy and trade protectionism during his inauguration," HSBC Asian currency strategist Alastair Pinder said in a research note.
  • The Bank of Russia will resume interest rate cuts only in March, despite pressure from an appreciating ruble, Bank of America economist Vladimir Osakovskiy said in a research note.
  • Turkey’s central bank Governor Murat Cetinkaya faces a “tremendous interest rates dilemma” at tomorrow’s Monetary Policy Committee meeting, according to Matys at Rabobank.
Before it's here, it's on the Bloomberg Terminal.
LEARN MORE