Emerging-market currencies fall

London - Emerging-market currencies dropped as the lira posted its biggest five-day loss since the global financial crisis. Stocks in developing nations rose with commodities.

The Turkish lira was the worst-performer among its major peers as  investors said nothing short of higher interest rates will stem its decline after the central bank on Tuesday lowered the level of foreign-exchange reserves it requires commercial lenders to hold.

A gauge of developing-nation stocks rose to a two-month high, led by raw-material producers.

Traders also watched Donald Trump’s first press conference as US president-elect, which spurred a brief bout of volatility on financial markets.

Currencies

The MSCI Emerging Markets Currency Index fell 0.4% at 4 in New York. Turkey’s lira weakened 2% to a record low of 3.8646 per dollar.

Mexico’s peso slid 0.2% to another all-time low of 21.8574; it fluctuated during Trump’s press conference.

Brazil’s real dropped 0.1%; after the close, policy makers unexpectedly slashed the benchmark interest rate by three-quarters of a point as they seek to jumps-start the country’s stagnant economy.

Stocks

The MSCI Emerging Markets Index added 0.1%, rising for a second day. South Korea’s Kospi Index rose 1.5%, leading gains among major peers.

Brazil’s Ibovespa Index advanced 0.5%; miner Vale and oil giant Petroleo Brasileiro contributed the most to the increase. Argentina’s Merval Index halted a 10-day rally.

Top stories

Brazil slashes key rate in bid to revive flat lining economy why the Lira’s in Trouble: 2017’s Worst Performer in Charts Best Asian FX Forecaster Fears Trump Risk More Than China: Q&A Brazil’s rate cut "very dovish" signal: BBH Santander Brazil CEO sees room for single-digit selic rate.

Analysis

TURKEY: "A hike of 200 basis points would probably be insufficient as exchange rates and rates markets are already pricing in more than that," said Mark Cudmore, a strategist and former currency trader who writes for Bloomberg.

MEXICO: Trump’s press conference shows he hasn’t softened his stance on Mexico, which should continue putting pressure on the peso, said Win Thin, head of emerging-market currency strategy at Brown Brothers Harriman.

BRAZIL: The central bank "made it very clear that it sees a better inflation and exchange rate outlook and worse activity which made them opt for a more aggressive cut," said Luciano Rostagno, the chief strategist at Banco Mizuho.