On the eve of the Jackson Hole meeting, emerging market currencies soar to new highs
Ahead of the annual meeting of the Jackson Hole Federal Reserve, the emerging market currency index has reached a historical high, benefiting from investors' increased interest in high-risk assets. The Chilean peso and the Brazilian real have performed well, with stock markets in developing countries also rising. Analysts point out that improved US economic data is affecting market sentiment, with traders focusing on Federal Reserve Chairman Powell's speech for monetary policy clues. At the same time, the Bank of Japan's interest rate hike is also having an impact on the market. Both the South African rand and the Brazilian real have reached new highs in a year
Intelligent Finance APP noticed that, ahead of the annual meeting of the Jackson Hole Federal Reserve later this week, investors' interest in high-risk assets has increased, with the emerging market currency index reaching a historic high on Monday.
Supported by the rebound in metal prices, the Chilean peso and Brazilian real were the currencies with the largest gains. Currencies from Thailand, South Korea, and Malaysia also performed well, while the Mexican peso rose against the trend, impacted by concerns over judicial reform and the yen's rise affecting arbitrage trading. Stock markets in developing countries rose.
Barclays' New York-based strategist Erick Martinez said, "Based on the latest data from the United States, we are back to the scenario of a soft landing in the United States. We see that when concerns about a US economic recession intensify, these currencies are sold off, and now they are starting to rebound."
Fund managers are waiting for Federal Reserve Chairman Powell's speech at the central bank's annual meeting this week to gain clues about the pace of the US easing cycle.
Ulrich Leuchtmann, Head of Foreign Exchange Research at Deutsche Bank, said in a report, "The rate-cut cycle that everyone is expecting should not be a particularly important thing." "But the fact is that it is—because everything depends on the speed."
Traders will also focus on Bank of Japan Governor Kuroda, who will attend parliament on Friday, as the massive unwinding of arbitrage trades following Japan's unexpected rate hike last month continues to reverberate in the market.
The possibility of an earlier-than-expected rate hike by the Brazilian Central Bank continues to rise, driving the appreciation of the Brazilian real. The Brazilian benchmark stock index Ibovespa hit a historic high when priced in reais, but when priced in US dollars, it is still far from reaching this milestone.
After the US announced that Israel had accepted a ceasefire, the shekel reduced its losses.
The South African rand against the US dollar hit a one-year high, marking the longest continuous uptrend since 2011, as optimism about the pro-business government alliance continues to rise. On Monday, the country's dollar bonds performed the best among emerging markets.
The MSCI Emerging Markets Stock Index hit a one-month high, with Asian tech stocks such as Alibaba, TSMC, and JD.com being the main drivers