(Bloomberg) — Emerging-market currencies paused their recent advance on Thursday amid thin liquidity due to the Thanksgiving holiday, with Latin America underperforming its peers in other parts of the developing world.
The MSCI indexes tracking emerging-market currencies and equities were both steady on a quiet trading day. The Chilean and Colombian pesos were the worst performers in the session, followed closely by the Brazilian real, a reversal for the region after posting strong gains in the previous day.
“Today EMFX looks much calmer given the lack of data in the calendar and the long weekend in the US,” said Jose Prieto Jaramillo, business head at BTG Pactual in Bogota. There was a lot of volatility this month in terms of rate-cut expectations, but the latest ADP employment data reinforced a scenario of policy easing, he added.
The Federal Reserve’s Beige Book supported the view. Employment declined slightly and prices rose moderately, according to its survey of regional business contacts. Economists at JPMorgan Chase & Co. now see the Federal Reserve cutting interest rates next month, a reversal of the bank’s briefly held view that policymakers would delay reducing borrowing costs until January.
In Asian markets, the South Korean won climbed after the Bank of Korea dropped language signaling a rate-cut bias from its statement, while emphasizing it remains open to easing if needed.
The onshore yuan paused a four-day gain after the Chinese central bank set the currency fixing at a level weaker than estimated for the first time since July. Bets on the next moves by the US Fed also remained in focus for global sentiment.
“The fix has set a tone for Asian currencies,” Fiona Lim, a senior foreign-exchange analyst at Malayan Banking Berhad in Singapore, said of the yuan. “And a lot really depends on the USD moving forward, a December rate cut is already priced in around 80%. As such, I think it is hard for the USD to break out of its recent ranges either way.”
The moves didn’t change the overall bullish environment for developing assets this year.
“Emerging-market fundamentals look in good shape and repayment risks seem low with most at-risk sovereigns expected to meet their Eurobond payments through 2026,” JPMorgan Chase & Co. said in its EM sovereign credit outlook note dated Wednesday.
EM sovereign spreads were last at “such tight levels for so long” before the great financial crisis, JPMorgan added.
In primary debt markets, Poland’s debt chief said the government is planning to front-load its 2026 international issuance calendar after a widening of the budget deficit due to defense spending.
While in Latin America, Moody’s Ratings downgraded sugar powerhouse Raizen SA, cutting to junk one of Brazil’s last remaining investment-grade corporate credits.
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