(Bloomberg) -- An index of emerging-market currencies climbed to a record high Monday as investor appetite for riskier assets grew ahead of the Federal Reserve’s Jackson Hole symposium later this week.
The Chilean peso and Brazilian real were among the biggest gainers, supported by a rebound in metals prices. Currencies from Thailand, Korea and Malaysia also outperformed, while the Mexican peso bucked the trend, weighed down by concern over judicial reforms and a renewed rally in the yen that’s affecting carry trades. Developing-world stocks advanced.
“With the latest data from the US we’re back to the US soft-landing scenario,” said Erick Martinez, a strategist at Barclays in New York. “We’re seeing a rebound in the currencies that sold off when concern over a US recession increased.”
Money managers are awaiting Fed Chair Jerome Powell’s remarks this week at the central bank’s annual meeting to get clues on the pace of the US easing cycle.
“An interest rate cut cycle that everyone and their brother is expecting should not be a particularly relevant thing,” Ulrich Leuchtmann, head of FX research at Commerzbank AG, said in a note. “But it is — because it’s all about the speed.”
Traders will also monitor Bank of Japan Governor Kazuo Ueda, who’s set to appear before parliament on Friday, as the massive unwinding of carry trades after Japan’s surprise rate hike last month continues to reverberate across markets.
Also boosting Brazil’s real are rising odds the central bank will kick off rate hikes sooner than previously expected. Ibovespa, the nation’s benchmark stock index closed at a record high in reais terms, but remains far off that milestone in dollar.
The shekel pared losses after the US said Israel had accepted a cease-fire.
The South African rand, trading at a one-year high versus the dollar, posted its longest winning streak since 2011 as optimism grows over the pro-business government coalition. The nation’s dollar debt was among the best performing in emerging markets Monday.
MSCI’s EM equity gauge was trading at the highest in a month. Asian technology stocks, including Alibaba Group Holding Ltd., Taiwan Semiconductor Manufacturing Company Ltd. and JD.com Inc. were the main drivers.
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