Currency Trends in Emerging Markets
(Bloomberg) — The currencies from Brazil, South Africa, and Mexico did well against other emerging market currencies on Monday. This positive shift came as trade worries subsided, and trading activity in the U.S. bond market was light due to a holiday.
During the Americas session, both the Brazilian real and the South African rand climbed 1.3%. This uptick can be attributed to a heightened investor appetite for risk, bolstered by rising commodity prices and signals from President Trump’s administration suggesting a willingness to engage in discussions with China. However, despite this, foreign exchange rates overall dipped, and stock indexes in Asia fell to their lowest points in over a week.
“We’re seeing a pullback in everything that sold on Friday: high-carry currencies, commodities, stocks,” mentioned Barclays analyst Eric Martinez Magana. “The environment is back to favoring carry.”
Over the weekend, President Trump and Vice President Vance hinted at a readiness to resume trade talks. Still, Treasury Secretary Scott Bessent remains optimistic about a potential meeting between the two leaders at the Asia-Pacific Economic Cooperation summit later this month in South Korea. While Asian currency benchmarks improved from their recent lows, the Taiwanese dollar lagged behind others in performance.
Lloyd Chan, a strategist at Bank of Mitsubishi UFJ, shared thoughts about potential pressures on currencies closely linked to China’s economy and global trade, such as the won, Taiwanese dollar, and Malaysian ringgit.
Turning to Latin America, both the Chilean peso and Peruvian sol excelled as copper prices rose, which is vital for both countries. Recent data also showed that China’s imports of copper and iron ore hit their highest levels of the year in September.
The Brazilian real has bounced back after a near 3% drop in the previous session. However, it may still face challenges as fiscal uncertainties loom, particularly regarding the government’s plan to extend social benefits to 2026 amid unclear fiscal targets for next year.
In Eastern Europe, currencies faced pressures stemming from a common currency dealing with a strong dollar and ongoing political turmoil in France. Meanwhile, the Israeli shekel gave back some of its recent gains, as expectations of a peace agreement with Hamas fell short, making it the biggest underperformer of the session.
