Emerging market currencies were broadly steady on Friday as investors exercised caution ahead of U.S. President-elect Donald Trump’s inauguration next Monday, while also monitoring developments in the Middle East after the Gaza ceasefire deal.
Investors’ focus was on a meeting of the Israeli cabinet, which is expected to give final approval to a deal with Hamas for a ceasefire and release of hostages.
Israel’s shekel was set to notch its best week since November. Israel’s government dollar bonds were broadly steady ahead of the meeting after rallying earlier in the week.
MSCI’s index of EM currencies was flat, but was set for its first weekly gain in seven. MSCI’s EM stock index was up 0.1%, set for its fourth straight session of gains.
Emerging markets recovered some ground this week, after softer-than-expected U.S. inflation data halted a rally in the dollar and Treasury yields.
Still, investors refrained from placing big bets ahead of Trump’s entry into the White House next week, as his threats of tariffs overshadow the outlook for growth, even as local markets grapple with the possibility of U.S. interest rates remaining higher for longer.
“Investors are fearful that Trump will start off on Monday early next week with an aggressive position on trade,” said Chris Turner, global head of markets at ING.
“It’s going to be the worst year for emerging markets since 2020 – the strongest economy (in the U.S.), high yields, and a strong dollar are going to attract a lot of global capital, making a very difficult financing environment for emerging markets.”
The World Bank’s latest Global Economic Prospect report said developing economies faced their weakest long-term growth outlook since 2000.
The Hungarian forint weakened 0.5% against the euro, after its recent six-session gaining streak, and the Czech crown slipped 0.1%.
The Polish zloty was off 0.1% after Poland’s central bank held rates steady on Thursday, and the WIG 20 was up 0.7%.
Turkey’s lira weakened 0.4% to a fresh record low against the dollar, and was set for its 13th week of losses, its longest run since March. A central bank survey showed end-2025 inflation was seen at 27.05%.
South Africa’s rand gained 0.3% against the greenback, poised for its best week since September.
Meanwhile, worries about China’s property sector increased after reports the alleged detention and release of China Vanke’s CEO. Moody’s downgraded Vanke’s corporate rating to B3 from B1.
(Reuters)