Developing-nation currencies and stocks advanced Thursday as positive signals on global trade and steps toward a truce in Ukraine supported risk sentiment.
The MSCI index for EM currencies ended the day with a 0.3% gain, as names in eastern Europe climbed on optimism of a ceasefire in Ukraine. The MSCI EM Index for equities climbed 1.3%, the most in two weeks, as chip manufacturer Taiwan Semiconductor Manufacturing Co rose to a record on the prospect of being exempted from US semiconductor tariffs.
Semiconductor shares “have performed strongly today in view of the tariff exemption announcement,” said Matthew Peacock, an emerging-market equities analyst at Aberdeen in London, who also cited the higher likelihood of a US rate cut in September. “While this is positive for EM stocks, volatility will likely persist for the remainder of the year due to ongoing tariff uncertainties.”
Moves in the developing currencies index were largely driven by the US dollar Thursday, which wavered between gains and losses on a string of news reports about the Federal Reserve. Earlier, the dollar climbed after Federal Reserve Governor Christopher Waller emerged as the favorite pick for Jerome Powell’s replacement, easing investor concerns over the Fed’s independence. But reports on Stephen Miran’s nomination to the Fed board subsequently added pressure to the greenback.
The Philippine peso and Taiwan dollar advanced against the greenback. The Philippine peso rose 0.9% after economic growth in the second quarter beat expectations even as trade and industrial expansion slowed amid uncertainty over the impact of US tariffs.
Eastern European currencies like the forint and zloty advanced, with stocks listed in Warsaw also benefiting from the prospect of talks between Russia and the US on Ukraine. The Czech koruna advanced against the dollar after policymakers held interest rates for a second meeting, in line with expectations. Deputy Governor Eva Zamrazilova said that, in her view, the cycle of monetary easing was “almost certainly finished” due to concerns over soaring housing prices and strengthening domestic demand.
Mexico’s peso held its losses, underperforming peers as the nation’s central bank cut interest rates by a quarter point to 7.75%, as expected. Headline inflation in July slowed more than forecast, hitting the lowest level on an annual basis since late 2020.
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Ukraine’s dollar bonds climbed after the Kremlin confirmed plans for a meeting between the Russian and US leaders, rekindling bets on a potential truce between Moscow and Kyiv. The country’s dollar bond due in 2036 rallied nearly 4 US cents on the dollar to 53 US cents, with other securities also rising.
