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Emerging markets: Currencies ride out Fed hike, trade-row escalation

Oct 01 2018 08:06
Tomoko Yamazaki, George Lei and Alex Nicholson, Bloomberg

Emerging-market currencies rounded off a winning month, defying the prospect of further rate hikes by the Federal Reserve, as more developing-nation central banks deployed tighter monetary policies to backstop local markets.

Highlights for the week ended September 28:

Trade tension between China and the US escalated as some $200bn (about R2.8 trn) of Chinese products became subject to US tariffs on September 24, on top of $50bn (about R700bn) of existing levies.

Meanwhile, $60bn (about R840bn) of goods from the US became subject to higher Chinese tariffs, adding to the $50bn already levied.

Federal Reserve officials raised interest rates and cemented expectations for another hike this year as they reaffirmed that a strong US economy will probably warrant further gradual increases well into 2019.

Turkey’s lira led emerging-market currency gains as a refinanced loan by the nation’s second-largest listed lender cooled concern of a debt crisis.

Argentine’s peso was the worst performer for the week and the quarter; central bank President Luis Caputo resigned on Tuesday and was replaced by Guido Sandleris, an academic who’d been serving as deputy economy minister. The nation won a promise of extra cash and faster payments from the International Monetary Fund, which expanded a record bailout to about $57bn (about R800bn) over three years.

China-listed stocks will be added to FTSE Russell’s global indexes; the index compiler will also review Argentina and Vietnam for possible reclassification as secondary emerging markets.

Poland’s stocks debuted in the FTSE Russell developed-nation benchmark on Monday Donald Trump said there’s "good chance" Canada will join trade pact with US and Mexico, even as he claimed to reject meetings with Justin Trudeau over Canadian tariffs.

The US Congress is said to be unlikely to pass any new sanctions on Russia, including proposals that would affect its sovereign debt and energy projects, until after November elections.

The Reserve Bank of India allowed banks to dip further into statutory liquidity reserves to help them meet coverage ratio needs; the government raised import taxes on $12bn (about R179bn) of goods as it seeks to narrow the current-account deficit from a five-year high.

Indonesia’s central bank raised its benchmark interest rate for the fifth time since May, while the Philippine central bank hiked rates to the highest since 2011.

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