(March 10): Most emerging-market currencies rebounded from earlier losses as the dollar and oil prices sank after US President Donald Trump signalled the Iran war could be ending soon.
A gauge tracking emerging-market currencies gained as much as 0.2% in afternoon trading Monday after Trump said the military operation is “very far” ahead of its initial four- to five-week timeframe. The benchmark was down as much as 0.8% earlier. The late moves pushed a Bloomberg gauge of the greenback down 0.2% while Brent prices erased an earlier surge, trading below US$90 per barrel.
Trump’s remarks “signal the intention to end the conflict soon, that it’s getting closer to the objectives of the war, so this is positive for the oil outlook, and hence the global economy,” said Marco Oviedo, senior strategist at XP Investimentos. “If we can confirm this in the next few days, the rally will continue.”
The Brazilian real climbed following Trump’s comments, jumping 1.6% on the day and outperforming peers. The South African rand — often a measure of risk appetite — followed, gaining 1.5% against the dollar. Most currencies rose by the end of New York trading, even as the MSCI EM FX Index closed 0.4% lower after end-of-day adjustments.
Across equity markets, the Vanguard FTSE Emerging Markets ETF leaped to session highs after Trump’s remarks, rising as much as 1.6%. Latin American equities broadly rallied, with the MSCI EM Latam Index gaining 1.5%.
See also: Indonesian stocks, rupiah slump as Iran conflict escalates
The Asia-heavy MSCI’s equity benchmark for emerging markets trimmed its losses, trading down about 3% at the close in New York. Earlier, the index tumbled as much as 4.3%, raising concerns that it would enter correction territory — a level reached when an asset is 10% off its most recent high.
Markets have been roiled over the past week as the war in the Middle East sent Brent prices soaring and led traders to seek haven assets amid the intensifying worries around economic growth. Currencies ranging from India and Indonesia to Egypt had hit record lows.
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