Most emerging market currencies advanced as hopes of a deal in the Middle East boosted risk sentiment and US data showed a strong labor market.
South Africa’s rand and Mexico’s peso — often seen as barometers of risk appetite —were among the best performers. Brazil’s real also advanced as markets largely shrugged off news that the US is proposing a new 25% tariff on the Latin American country’s goods.
“Sentiment is positive, probably because economic indicators in the US are not bad and the Iran conflict might be solved,” said Marco Oviedo, senior strategist at XP Investimentos. “Investors have been very cautious lately and focused on the war, and that’s the main driver now.”
President Donald Trump is still optimistic the US can reach an interim peace deal with Iran soon after the Islamic Republic threatened to suspend talks because of Israel’s escalating attacks in Lebanon. “I think you’re talking about over the next week,” Trump said to ABC News late on Monday, referring to a memorandum of understanding with Iran to reopen the Strait of Hormuz.
Still, oil touched highs for the day after AFP reported that Hezbollah won’t accept a “partial ceasefire” with Israel.
On the data front, US job openings jumped in April to the highest level in almost two years and layoffs fell, adding to signs the labor market remained resilient.
In equities, stocks advanced for the third day on the back of a rally fueled by Asian technology stocks, hitting a fresh record. The MSCI index has advanced more than 27% so far this year.
“We like EM because it is one of the few markets showing both positive price and earnings momentum, with Asia tech and AI leadership still available at relatively attractive valuations despite strong gains year to date,” said Lilian Chovin, head of asset allocation at Coutts & Co.
In credit, Senegal’s dollar bonds traded near record lows Tuesday as a deepening political crisis in the West African nation turned a top emerging-markets performer into the worst. Senegal’s bonds had returned more than 10% earlier this year. But those gains were swiftly wiped out, first by the market fallout from the Iran war, and then by a political feud between President Bassirou Diomaye Faye and Prime Minister Ousmane Sonko.
Elsewhere in the developing world, a key metric has emerged that investors are using to size up the riskiness of a country’s debt: whether its leaders are in good standing with US President Donald Trump. Some winners are easy to spot, like Venezuelan bonds, which have racked up the biggest gains in emerging markets this year following the oil-rich country’s rapprochement with the Trump administration.
With assistance from Gabriel Diniz Tavares.
This article was generated from an automated news agency feed without modifications to text.
