Emerging Markets in Focus This Week: South Africa, Brazil, Peru

  • South Africa among nations to announce interest rate decision
  • Brazil’s President Michel Temer faces new set of charges

With trader caution on the rise after an index of developing-nation currencies had its biggest weekly decline since March, attention will turn to a string of central bank decisions this week.

South Africa is foremost among the countries where policy makers are due to decide on interest rates, after the rand registered the biggest decline among emerging markets in the five days through Friday. Hungary, Kenya, the Philippines, Taiwan and Indonesia will also announce decisions this week.

Elsewhere, investors will be watching Peruvian President Pedro Pablo Kuczynski’s next move after his finance minister lost a confidence vote. Brazil will also be in the spotlight as lawmakers seeks to press ahead with pension reforms even as President Michel Temer faces fresh corruption charges.

South Africa

The central bank’s monetary policy committee will probably cut the benchmark lending rate to 6.5 percent on Sept. 21, according to the median estimate of 20 economists surveyed by Bloomberg. That would be the second consecutive 25 basis-point reduction.

The rand ended four straight weeks of gains last week, its longest rising streak this quarter. The currency’s one-week implied volatility climbed 2.3 percentage points in the five days through Friday, the most in emerging markets after Indonesia’s rupiah.

Indonesia

Bank Indonesia’s policy review on Friday will be more closely watched than usual to see if the central bank doubles down on last month’s surprise cut. Inflation has slowed for the past two months and the rupiah rallied to a 10-month high against the dollar last week.

Brazil

Traders will be watching to see if the latest charges against Temer will delay a vote on pension reform. The president is facing a second set of criminal charges after the chief public prosecutor, Rodrigo Janot, on Thursday formally accused Temer of obstruction of justice and criminal conspiracy, saying he and several of his closest aides took kickbacks worth 587 million reais ($189 million) from government contracts.

Peru

Peruvian President Pedro Pablo Kuczynski is poised to form a new cabinet after Fernando Zavala, the cabinet chief and finance minister, lost a confidence vote on Friday. Investor concern, as measured by the sol’s one-month implied volatility, rose the most this month as the political crisis cast doubt on the president’s ability to push through his reform agenda.

Hungary

Hungary’s central bank is likely to use its next policy meeting to cut the overnight deposit rate deeper into negative territory, reduce access to its benchmark instrument and impose other monetary easing measures, according to a Bloomberg survey. The forint weakened the most since April last week.

— With assistance by Aline Oyamada

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