With average consumer-price increases easing for two successive quarters from an 11-year high, more developing nations are seeing their inflation-adjusted rates turn positive and widen their gap over developed countries. Latin America is at the forefront of this change: Brazil and Mexico offer real yields of 9.1% and 5%, respectively, compared with near-zero returns in the US and minus 5.6% in the UK.
Some of the world’s biggest investors are backing emerging-market currencies to outperform their rich-nation peers as monetary tightening pauses, growth slows and calls for a weaker US dollar become louder.
T. Rowe Price, which oversees US$1.3 trillion, Fidelity International and abrdn plc are among those placing bullish bets in Latin America, where two years of aggressive interest-rate hikes have stymied inflation, putting it on course for rate cuts earlier than most other regions in the world. Amundi SA, Europe’s largest money manager, expects the Mexican peso and Brazilian real to lead the rally.
