(Bloomberg) — Equities in emerging markets resumed their decline after a two-day respite as Asian technology stocks continued to suffer. Currencies rebounded against a broadly weaker dollar.
The benchmark MSCI EM stock index fell 0.5% to bring this week’s losses to 1.5%, with Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. leading the drop. The Mexican peso, one of the biggest victims of unwinding of carry trade strategies, fluctuated before the central bank decides on interest rates on Thursday.
Equity markets across the world tumbled on Monday on concerns about a deeper economic slowdown. Following weak US jobs data last week, investors will be watching the release of initial jobless claims later in the day for clues about a potential Federal Reserve policy reaction.
The MSCI gauge for developing currencies rose 0.2%, led by Indonesian rupiah and Thai baht. The Mexican peso erased earlier gains to trade 0.1% weaker to the dollar. It’s down 3.7% this month as the yen’s surge unraveled the trading strategy based on borrowing at low rates in Japan to fund purchases of higher-yielding assets elsewhere.
Economists are divided on whether the Latin American nation will cut the benchmark rate by a quarter-point or hold it steady on Thursday.
“We are fearful of Mexican politics again weighing on the peso in September when the new parliament will discuss constitutional reforms,” said Chris Turner, head of foreign exchange strategy at ING Bank NV in London. “We struggle to see USD/MXN trading sustainably below 18.50 over the coming months.”
In emerging Europe, the Hungarian forint outperformed regional peers with a 0.3% gain to the euro after July inflation print surprised on the upside and narrowed the room for further monetary policy easing.
–With assistance from Selcuk Gokoluk.
©2024 Bloomberg L.P.
