Emerging-market currencies rose Monday as investors followed diplomatic efforts from the US and its allies to contain the war in the Middle East. Elections in Ecuador and Poland also helped boost assets.
(Bloomberg) — Emerging-market currencies rose Monday as investors followed diplomatic efforts from the US and its allies to contain the war in the Middle East. Elections in Ecuador and Poland also helped boost assets.
Brazil’s real and Mexico’s peso climbed, along the South African rand and Hungary’s forint, as US Secretary of State Antony Blinken steps up efforts to ensure humanitarian aid to people in Gaza and President Joe Biden considers a visit to Israel.
US officials are intensifying their diplomatic efforts to warn Iran against entering the conflict, with many traders now betting the conflict won’t expand across the region. Both Israel’s benchmark equity index and Egypt’s main gauge advanced in Monday trading.
The mood was mixed, though, with the shekel hitting an eight-year low, breaching the symbolic threshold of 4 per dollar. The currency posted its worst day of losses since the immediate aftermath of the attack by Hamas more than a week ago.
Read More: Blinken Returns to Tel Aviv in Bid to Contain War
“Performance related to the window of the Israel-Gaza conflict is very skewed, and it has been driven by some of the underlying trends as well as the impact in commodities,” said Alejandro Cuadrado, the global head of FX & LatAm strategy at BBVA.
The Chilean peso fell 0.7% against the dollar, leading losses among emerging-market currencies. Traders have avoided taking bullish positions because of the country’s dependence on imported oil, which leaves it vulnerable to a potential jump in crude prices due to the conflict in the Middle East.
In Ecuador, the election of investor-favorite Daniel Noboa sent bonds rallying, with the notes due in 2035 jumping as much as 2.9 cents on the dollar to the highest in about a month.
Meanwhile, Polish stocks, bonds and the currency rallied after the pro-European-Union Civic Coalition neared victory in Sunday’s vote. Money managers including Goldman Sachs Group Inc. said the new government is likely to bring in prudent fiscal policies and lead the central bank to become more hawkish.
“The Civic Coalition promotes the return of a more EU-friendly stance and its victory would increase the prospect of an acceleration of the disbursement of European Union transfers to Poland,” Kevin Daly, a strategist at Goldman Sachs, wrote in a note. “We expect the central bank reaction function to now turn more hawkish.”
Read more: Poland’s Pro-EU Opposition to End Eight Years of Populist Rule
Elsewhere, Sri Lankan bonds rallied amid a proposed restructuring the country’s debt to dollar bondholders which Citibank analysts called “extremely generous” to investors.
Stocks in Latin America climbed along with US equity gauges, even though a broader emerging-market index for stocks edged lower.
Some of the day’s early losses came amid concern over a US plan for sweeping measures to restrict China’s access to advanced semiconductors and chipmaking gear.
(Updates with closing prices throughout.)
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