EM currencies ride out Fed hike, trade-row escalation


  • Economy
  • Monday, 01 Oct 2018

U.S. President Donald Trump has directed aides to place U.S. tariffs on about $200 billion more of Chinese goods, according to a person familiar with the matter.

MOSCOW: Emerging-market (EM) currencies rounded off a winning month, defying the prospect of further rate hikes by the Federal Reserve, as more developing-nation central banks deployed tighter monetary policies to backstop local markets.

Highlights for the week ended Sept 28:

> Trade tension between China and the US escalated as some US$200bil of Chinese products became subject to US tariffs on Sept 24, on top of US$50bil of existing levies. Meanwhile, US$60bil of goods from the US became subject to higher Chinese tariffs, adding to the US$50bil already levied.

> Federal Reserve officials raised interest rates and cemented expectations for another hike this year as they reaffirmed that a strong US economy will probably warrant further gradual increases well into 2019.

> Turkey’s lira led emerging-market currency gains last week as a refinanced loan by the nation’s second-largest listed lender cooled concern of a debt crisis.

> Argentine’s peso was the worst performer for last week and the quarter; central bank President Luis Caputo resigned last Tuesday and was replaced by Guido Sandleris, an academic who’d been serving as deputy economy minister; the nation won a promise of extra cash and faster payments from the International Monetary Fund, which expanded a record bailout to about US$57bil over three years.

> China-listed stocks will be added to FTSE Russell’s global indexes; the index compiler will also review Argentina and Vietnam for possible reclassification as secondary emerging markets.

> Poland’s stocks debuted in the FTSE Russell developed-nation benchmark last Monday.

> Donald Trump said there’s “good chance” Canada joins trade pact with US and Mexico, even as he claimed to reject meetings with Justin Trudeau over Canadian tariffs.

> The US Congress is said to be unlikely to pass any new sanctions on Russia, including proposals that would affect its sovereign debt and energy projects, until after November elections.

> The Reserve Bank of India allowed banks to dip further into statutory liquidity reserves to help them meet coverage ratio needs; the government raised import taxes on US$12bil of goods as it seeks to narrow the current-account deficit from a five-year high.

> Indonesia’s central bank raised its benchmark interest rate for the fifth time since May, while the Philippine central bank hiked rates to the highest since 2011.

Asia:

> The Chinese yuan weakened; the nation refuted President Donald Trump’s accusations that Beijing is trying to interfere with congressional elections, a move that further raises tensions as the world’s biggest economies fight a trade war. — Bloomberg

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